Excess Estimated Tax

[BillEngr]

Please verify that TurboTax looks at the total yearly tax due and divides it by 4 to arrive at a uniform quarterly tax due and compares it to the total yearly tax paid (withheld plus estimated) divided by 4. And then these two are compared to see if on a quarterly basis any amount is under-paid? I ask because I have a one-time Required Minimum Distribution (RMD) whose withholding would exceed the averaged quarterly tax due in the month it is done in, but then potentially show underpayment in the other quarters. My question is: If this is true, would TurboTax "pass" the underpayment test in remaining quarters if I did excess RMD withholding in the first quarter to "carry over" to the remaining quarters, given the total for the year is correct? The alternative would be to do normal withholding (no excess) for the RMD, then do estimated payments for the other three quarters such than no quarter is underpaid.

[RobertB4444]

Your RMD will be reported on a 1099-R with the withholding reported there as well.  Withheld taxes are treated by the IRS as having been received equally on each day of the year throughout the year.  So your RMD will be covered provided enough taxes are withheld.

The estimated payments calculated by TurboTax are based off of the current year taxes and are just designed to avoid penalties and interest.  Their amount is calculated based on the current year taxes due and current year withholding.  If your next year is similar then they've covered you well.

@BillEngr 

[BillEngr]

Just to clarify my question: Since I plan to take the RMD as a one-time lump distribution along with withholding, this would make the quarter that this occurrence happens to be un-equal to the combination of income and withholding in the other quarters. In fact, I might over-withhold from the RMD to cover other income that had no withholding to make the total for the year be correct. I think you confirmed that having un-equal quarters for income/withholding is ok as long as the total withholding for the year matches the total tax due for the year, within $1,000. Correct?

[AmyC]

Yes, that is good. The IRS expects withholdings each quarter to match up with the income. A stock bonus would mean extra taxes paid. A vacation house sold would be extra taxes that quarter. The quarters are not expected to be even when extra circumstances happen but a regular job with standard wage and withholding should be fairly regular and even. The IRS expects the extra amounts paid when you have extra income. The IRS wants their money the same quarter that you receive it. This doesn't usually come into play but when penalties and problems arise, the IRS can go looking.