Why do I have a penalty for underpayment of estimated taxes that is related to a EE mature savings bond that was cashed late 2022?

[whaag]

I know that I have to pay Federal tax on the interest, but how would I estimate that and have it taken out of the proceeds?

[markcbell]

There is an option in TT to enter your income by the quarter or even monthly. Do that so your bond shows higher income in the last quarter, or month. That will lower or eliminate your penality. 

[MarilynG1]

To possibly reduce or eliminate your underpayment penalty, open your return in TurboTax and search for annualizing your tax (use this exact phrase). This will take you to the underpayment penalty section and we'll take you through the steps to possibly reduce (or eliminate) what you owe, especially since your extra income is related to investment interest.

Here's more detailed info on Form 2210.

[Mike9241]

there is a way to avoid estimated tax penalties regardless of how much income you have in the following year

There will be no federal penalties for not paying in enough taxes during the year if withholding and timely estimated tax payments equal or exceed 100% of your prior year tax (110% if your prior year adjusted gross income was more than $150K. most state laws where there is an income tax would require 100% of the prior year's tax but state laws do vary.