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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I will receive a lump sum payment (about $6500) from my mothers

Resolved Question:

I will receive a lump sum payment (about $6500) from my mother's tax deferred annuity (because of her death). On the form to receive the lump sum, I can choose to have federal and state tax withheld. Is 10% adequate for the federal tax withholding? Should I have CT state tax withheld and if so, what amount or percentage?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.

Hello Jake,


With an annuity, only part of the amount you receive will be subject to tax. Whatever amount your mother originally contributed to the annuity has already been tax paid, so the only part you will owe tax on is the interest that has accrued on the account.


You would really need to check with the issuer of the annuity to see how much of that is interest and how much was your mother's original contribution.


But generally speaking, since the entire amount will not be taxable, then having 10% federal withheld should be adequate. I would also suggest having another 3% withheld for CT state taxes. This should be at least a close enough estimate where you would not owe much more at the end of the year and may even get a partial refund. And this is as close of an estimate as I can give you without knowing what your mother's original contribution was to this annuity.


If this was helpful please press the Accept button.


Thank you Jake

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