Inherited a nonqual annuity w/taxable amt 36927 (lump). 3692 federal was withheld and now we owe $7941 (5726 fed and 2215 NY) Seems high to me-could it be wrong?

Forum|Forum|1 year ago
April 1, 2025
1 reply
0 views

It did not bump us from 24% bracket

TurboTax Deluxe Online

SusanY1

This looks correct to me, though it's impossible to know without examining the return.

This could be a combination of many things. But the primary cause seems to be too little tax withholding from the original payment.

You've indicated that you only withheld 10% ($3,692 on a $36,927 payment) but that you are in the 24% tax bracket.

If I've understood those facts correctly, that would mean there would be $5818 of additional federal tax, which is close to the number you are seeing.

(39627*24%=$9510 $9510-3692= $5818)

The additional $100 or so could be from adjustments to credits you may have been eligible for or other factors that aren't possible to see in this over-simplified calculation.

I imagine the state tax is similar - too little withholding (or none) which is causing you to see those swings in your net tax due.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

megreedyAuthor

Thanks so much for your reply! It does make sense; it just felt worrisome to send off that sort of a payment without having an expert weigh-in beforehand- thank you!

I have learned that since the decedent was of the age (he was 85 when he passed) to be entitled to the account, NY state allows for a 20K inherited pension and annuity exclusion that would be split by the 3 beneficiaries of the account. This means that $6667 would be excluded from total amount taxed by NY, but I don't know how I can find out if that was entered automatically or not by TurboTax on my NY state return. Are you able to advise me as to how I could check into this?

Thanks again!
Meg Capreedy

SusanY1

TurboTax generally does not automatically apply the state retirement exclusion. This is applied during the state interview in the section for "Wage and retirement adjustments". Be sure to enter this section of the interview if the questions don't populate automatically.

You will be given the option to "edit" the distribution in the program in most versions and once you enter this section it will ask you the questions appropriate to determine the exclusion amount.

For your case, be sure to answer "yes" to the question "Were You a Beneficiary?" This will open up an area to enter the decedent's date of birth, total amount of the pension exclusion and any amount already excluded on the decedent's return.

You will also be asked for the amount of the pension, annuity, or IRA which was excluded on the decedent's own return. Your 1099-R likely only represents the portion paid to you, so the answer there's like 0 in your case.

You can double-check that you are seeing the exclusion on the return by taking a look at the PDF prior to submitting the return to file. The exclusion will show up on IT-203 Line 28

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"