@Texas621 wrote:
Regarding quarterly estimated taxes and IRA withrawals, if the IRA withdrawal only occurred in the 4th quarter and you paid estimated taxes by the 4th quarter due date (mid-January), would there be any penalty? The estimated taxes paid by the January due date were 92.8% of the final taxes for the year. I reviewed Form 2210 and it indicated I did not need to file the form. I paid more in 4th quarter taxes than the prior year tax bill.
I have written to the IRS, but my concerns are falling on deaf ears. They are treating the December withdrawal as annualized for each quarter and charging penalites going back to the 1st, 2nd and 3rd quarters. I informed them that the withdrawal did not occur until December 19th of the tax year.
Am I correct?
The IRS assume that all lump sum income is paid evenly over the year, so they expect estimated taxes to also be paid evenly over the year. The solution to this is to file form 2210 using the "annualized income method" on page 3. Using the form in this way, you show the IRS your income by quarter, and that your payments in each quarter were appropriate for the income in that quarter. (The name "annualized income method" seems the opposite to me of what is actually happening, but that's the IRS for you.)
You should have included form 2210 with your tax return using the annualized method. Possibly, Turbotax is at fault for not recommending this. You have 60 days from the IRS notice to file a claim. Turbotax would cover any part of the penalty that is due to their error, if they accept the claim, but you are still responsible for whatever the correct tax and penalties would have been. And you still need to fix this with the IRS and pay now. You can't sit around waiting for Turbotax to make a decision because the penalty will grow and Turbotax won't be responsible for that.
https://ttlc.intuit.com/turbotax-support/en-us/help-article/account-management/turbotax-100-accurate...
At this point, I assume the IRS sent you a letter, which should contain the address of an office to dispute or appeal the assessment. You should prepare a form 2210 using the annualized method to recalculate the penalty, then send the form to the office along with a check for the revised amount. In fact, you should probably prepare an entire amended tax return that includes form 2210. Mail the amended return with your payment to the office that sent the notice, not the general address for amended returns. Keep copies for your records and use a mail service with tracking and proof of delivery. Make sure you reply before the deadline for appealing the assessment, or else you lose your right to challenge and the amount due becomes final.
