Can you help me figure out how to pay estimated taxes on inheritance from an annuity that my Uncle never paid taxes on?

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The trustee of my Uncle's estate (one of my brothers) told me that I need to pay estimated taxes on the annuity he left us. My Uncle never paid taxes on this annuity as it grew, so I need to pay estimated taxes to NY, CT, and the IRS. Can you help me figure this out?

[Hal_Al · Accepted solution]

Simple answer: you do NOT need to pay estimated taxes. You can just wait and pay when you file your tax return.

When you have a large jump in income, there is no under payment penalty if you had enough tax withheld to cover the 100% of the previous year's (not the current year) tax liability*.

You will only owe state tax to your state of residence. You do not pay tax (on this kind [annuity] of income to your uncle's resident state).

1099-R income (annuities and other retirement plans) is  taxed as ordinary income. No special rates.

If you would rather not owe, TurboTax (TT) can prepare the quarterly payment vouchers. In your 2017 software, enter at:

 Federal Taxes or Personal (H&B version)

 -Other Tax Situations

    -Other Tax Forms

        -Form W-4 and Estimated Taxes - Click the Start or Update button

 On the next screen answer No to the W-4 question

You only need to send in one voucher, for the quarter in which you receive the annuity payment. 

* If your adjusted gross income (AGI) for 2017 was more than $150,000 ($75,000 if your filing status for 2018 is married filing separately), you would need to pay in at least 110% of your 2017 tax under the General Rule to avoid an underpayment penalty.