Am I required to make quarterly withholding payments on income that I won't receive until the last day of the year, or just when I receive the distribution?

[rholmesid]

I have an unusual situation: I take my entire distribution from my retirement fund on the last business day of the year (Dec. 28). Based on my total income (SS + retirement) Turbotax expects me to make withholding of 1/4 of my expected tax obligation for the next year in each quarter. But I won't have the income for the retirement distribution until that last day. How can I be expected to pay withholding on income that hasn't been distributed to me yet? I can make the required annual withholding from the lump sum distribution on Dec. 28, but it seems I am expected to do it in four quarterly payments. (I am having SS withhold from my SS monthly payments, so my question only applies to the retirement distribution taken on Dec. 28.) I called the IRS and the agent could not answer my question, but seemed to imply that to be safe (and avoid any possible penalty for under-withholding) I should just go ahead and make quarterly payments with vouchers. This would be a bit of a hardship.

[BobinCT · Accepted solution]

You can do it when you take the distribution.  But then you need to fill out the part of Form 2210 that shows your income by quarter so that you don't pay a penalty.

[rholmesid]

Thanks! I'll know for sure next year -- right now I can't do a dry run, because I have to use the 2017 TurboTax to estimate my 2018 taxes, and since in 2016 I had no taxable income (living only on SS), I am "exempted" from the penalty for that reason. But I have filled out 2210 with the 2018 withholding for each quarter, and checked the box indicating the reason for the larger 4th quarter payment (didn't receive the income until that quarter). So your suggestion put me on the right track. Thanks again!