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About Jan 10, 2017 I received a surprise large disbursement/payment from a trust via check dated Dec 31, 2016. I assume the Schedule K-1 that I will eventually receive for tax year 2016 tax year will include it.

  1. Despite what may be reported on forthcoming K-1, can I treat this as 2017 income as it was received/not available to me until after 2016?

  2. If not, am I still allowed to make an estimated tax payment for 2016. My attempt at using the IRS inline payment appeared to only allow a 2017 tax year designation for estimated payments at this point. I thought I might be able to fill out a form 1040-ES for 2016 and send it in anyway. This would be to forestall any fees and penalties accruing.

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In theory, you should count it for 2017, if you could not have received the money prior to 1/1/17. See the IRS's page on constructive receipt for more details.

However, I'd be concerned about the trust's reporting; they likely reported it in 2016, and you could be subject to additional scrutiny if your return doesn't match the trust's return. This sounds like a good question to take to a CPA who can look into both the trust's and your income details together.

If you do end up needing to count it for 2016, you should look into whether using the Annualized Income calculation will help you. This allows you to figure each quarter separately, rather than assuming you pay estimated taxes equally across the four quarters, if your income varies significantly across quarters. This may not reduce the penalty to zero, but it may help significantly reduce it, particularly if the trust distribution is all of your underpayment (i.e., you would have gotten a refund otherwise).

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    If it does count as received in Dec 2016, officially you had until Jan 17 to make the Q4 estimated payment -- usually it's Jan 15 but this year that was Sunday and Jan 16 a Federal holiday. You can download the 2016 form by searching find.irs.gov/search?affiliate=irs-prior-fp for '2016 1040es' and mail it (assuming you now have the money in checking or other liquid form), and combining that with 2210-AI treatment you'll only owe penalty on about 25 days, which will be roughly one-quarter percent. – dave_thompson_085 Feb 9 '17 at 2:55
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    Gack! I focussed on the tree and forgot the forest! You may have a 'safe harbor'. If your situation in 2016 was (nearly) the same as 2015 except this one item, or to be exact if your withholding for '16 (computed on your 'normal' income) was enough to pay your '15 (prior year) tax for most people (110% of '15 if AGI over $150k) and your '15 tax was for a full year (not recent immigrant or bankrupt) then you are EXEMPT from the underpayment penalty. You have until the normal filing date (Apr 18 this year) to pay the remaining tax, and (best of all) you don't need to do 2210-AI. – dave_thompson_085 Feb 10 '17 at 13:58

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