Credit for RMD taxes paid to avoid Penalty

[normdd]

We are using Business TT for a Disability Trust.  The trust took an RMD in January and taxes were paid when the RMD was paid.  TT is calculating a penalty for underpayment of estimated taxes because it allocated the Trust and RMD income across the entire year.  No estimated taxes were paid in January, although taxes were withheld through the RMD .  I'm trying to figure out Form 2210 and I  cannot find a way to get credit for taxes withheld in January through the RMD so I can avoid the penalty.  Form 2210 just assumes the taxes withheld were in the year with no credit for the January withholding.  How can I avoid this penalty and/or get credit for the January withholding.  The RMD withholding is showing as a credit on taxes paid.

[Mike9241]

on the 2210 box D in part II must be checked. then you can enter actual withholding for each period.

[normdd]

Thanks for the quick reply!

I have Box D checked and was struggling on where to enter the RMD withholding amount.  On Part I line 3, I could enter the RMD withholding amount, but I am not sure that is the right place because the instructions do not mention withholding as an option and that line does not give me time credit for the early (January) withholding.

I was expecting that I should be able to enter teh withholding on Line 11, but  when I click on the number it takes me to the Tax Payments Worksheet.  I can enter the withholding and date, but I am not sure which Payment Method to use.  It was withheld, not actively paid by me to the IRS.

TT ignores the withholding value I entered on Part line 2 for form 2210, so that option did not work.

 I can't find anywhere in the instructions on how to enter a withholding number from a 1099-R

[RobertB4444]

The IRS assumes that income and withholding entered onto a 1099_R have been paid and withheld evenly throughout the year.  So you can't remove an underpayment penalty by weighting the income or withholding from that form.

The way to reduce the penalty is to weight the income towards the latter part of the year so that the taxes due are not as late as if they were due at the beginning of the year.

If all of the income and withholding for the trust are represented by this RMD then the penalty that you are paying is because there was not enough withheld, not because of the timing.  Increasing the withholding amount going forward will solve this problem in future years.

@normdd 

[normdd]

Thanks.  I find it strange that if I pay the RMD taxes in January on the RMD, I still get penalized for the entire amount at year-end if I under pay later in the year because of an unexpected income.  On my Virginia taxes, that state recognizes that the taxes were paid in January and avoids the penalty.  I found that if I credit the Federal tax payment as an ACH payment under Estimated Tax Payments, then TT calculated the penalty correctly.