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Your federal tax rate will be 0, 15, or 20%, depending on your income.
0% if you are in the 10-15% tax brackets, 15% from there up to $400,000 per year of income and after you make $400,000 of income it's 20%
What is my State tax liability?
In the state of California, the distribution is taxed as ordinary income
so you pay the same tax on it as you would any other income
For both state and federal, should I pay the taxes up front to avoid either estimated tax payments or penalty?
If you do not want to owe at the end of the year, then yes - you should pay the tax up front
I was told that the trust is responsible for paying the capital gains taxes before distribution. Is this true in some cases if so when?
The tax would be passed on to the beneficiary as the income from the trust is distributed to them.
The trust reports income, and gets a deduction for the amount distributed to beneficiaries.
If the trust does not distribute income during the tax year, then the trust pays the tax as it is due
But, typically the trust taxes are pretty close to the taxes as an individual
I forgot to mention, the Trust will be dissolved. The same answer for paying taxes is true in this case too?
Yes, the tax would pass through to the beneficiary
Can you tell me what Federal and State forms are required when submitting the tax payment?
For federal it would be 1040-ES because it would be an estimated tax payment and for California it would be 540-ES
Thanks Megan for your answers. I have no more questions. You have been much help!
Glad I could help. If you would, please rate as "excellent" so that I may receive credit for assisting you today
Sure, I just rated you as Excellent.