@Opus 17 wrote:
@dmertz wrote:
Tax withholding is treated as paid evenly throughout the year while estimated taxes are treated as paid when actually paid. By pay the tax via withholding from the IRA distribution, portions will be applied to earlier tax quarters.
I believe this is only true if you use the annualized method on form 2210.
@Opus 17
You do not need to use the annualized method in the situation that @dmertz suggested. As dmertz said, withholding is treated differently from estimated tax payments. All withholding is treated as if it was paid evenly over the course of the year, no matter when it was actually withheld. So a large amount withheld from a December IRA distribution is automatically spread over the year, and makes up for not having made estimated tax payments earlier. It's a built-in annualization, without having to fill out Form 2210 or Schedule AI. (I do this every year.)
A large amount of withholding in December is not a "lump sum estimated tax payment." It's a lump-sum withholding, and it's entirely different.
Anyone who was penalized in spite of a "lump-sum payment" either made an estimated tax payment instead of withholding, or still didn't pay enough in total even including the lump-sum withholding. Also note that the withholding has to be done in December (or earlier). You don't have until January 15 to withhold for the previous year.
