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Old 01-04-2016, 01:31 PM   #21
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I agree I can see having so little taxable income in the first 3 quarters in RE that it seems estimated taxes are not necessary. But we are talking the IRS here. Is pb4uski using the regular or annualized estimated tax method? When I read pub 505, I did not see a "as it comes in" method.

Could someone explain where in the tax code that paying estimated tax in the way presented would eliminate the penalty and need for filing the 2210 form?
I think audreyh1 is the expert on this. I think it's the annualized method and you do have to file the 2210 to prove everything was timely but there should be no penalty if done correctly. Work thru SchAI on the 2210 (and the instructions) to either convince yourself that this works (or convince yourself that you will never do it again).
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Old 01-04-2016, 02:05 PM   #22
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Our taxes are pretty simple but we have to send estimated taxes to the state (but not federal) as the pension plan only does withholding for the state of MD. Later this year I'll start SS so that will be a change. Turbotax has a function to calculate next year's taxes, or at least it has in the past.

Say, here's a SS question I haven't seen answered - Does SS do withholding for states? If they do I could just increase the SS withholding to cover the pension estimated taxes too and not have to bother with the quarterly payments.
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Old 01-04-2016, 02:29 PM   #23
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.......................- Does SS do withholding for states? If they do I could just increase the SS withholding to cover the pension estimated taxes too and not have to bother with the quarterly payments.
sounds like no........ Can Taxes Be Withheld From My SS Benefits? - AARP
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Old 01-04-2016, 02:31 PM   #24
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Oh well. So much for trying to make life simpler. Bummer.
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Old 01-04-2016, 02:38 PM   #25
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Originally Posted by bingybear View Post
I agree I can see having so little taxable income in the first 3 quarters in RE that it seems estimated taxes are not necessary. But we are talking the IRS here. Is pb4uski using the regular or annualized estimated tax method? When I read pub 505, I did not see a "as it comes in" method.

Could someone explain where in the tax code that paying estimated tax in the way presented would eliminate the penalty and need for filing the 2210 form?
The "as it comes in" method is the annualized income method where you take the first quarter's income, multiply by 4, calculated taxes, and then pay 22.5% of estimated tax owed. Subsequent uneven IRS quarters have similar factors to apply. By the final tax quarter you hit the 90% of estimated taxes that must be paid in Jan 15.

I think you would have to compute via annualized method, and pay what estimated taxes are due each quarter, even if tiny. You're going to have to do this work anyway, because using this technique will mean filing the 2210 to prove you don't owe penalties for underpayment for the first three quarters. So you'll eventually need those quarterly numbers to fill out the form.
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Old 01-04-2016, 02:38 PM   #26
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What I have been doing for several years to keep track of income sources (dividends etc) is to log them in as they are earned on an Excel worksheet that I total up quarterly and use that total to pay my estimated income (EFTPS) quarterly. I do not record pension and SS income as deductions are made for them.

It could not be more simple and it's pretty accurate as long as I keep it up.
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Old 01-04-2016, 03:03 PM   #27
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I do the 100% of the previous year's tax calculations for the first 3 payments. Most of my income happens in December so the final payment is adjusted up or down based on 95% of current year's tax due (to be safe). This usually prevents me having to file the 2210 form.
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Old 01-04-2016, 03:34 PM   #28
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In paying via the annualized income before, we've always paid at least 90% of taxes owed by Jan 15, yet that didn't keep us (the software) having to file the 2210 form.

I think there was a test comparing each quarter against 1/4 of the taxes owed (cumulative by quarter). And if less was paid in a given quarter you had to fill out the 2210 form.
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Old 01-04-2016, 04:17 PM   #29
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Doesn't paying all your tax in the last quarterly payment open you up to penalties unless it is paid by employer withholding? ...
No. Your obligation is simply to pay taxes as you are obligated for taxes. since my income is back loaded, my estimated payments are commensurately back loaded. The IRS provides for an annualized income installment method. I do have to include a Form 2210 in my return that essentially proves that I didn't have a tax liability in each of the first 3 quarters. I've never been questioned by the IRS at all.

Also, since my state's electronic filing doesn't do a state equivalent of the Form 2210, I've become acquainted with a nice lady at the state tax department and we have an annual conversation on how I don't owe them any penalties and interest as their system first thinks I do based on my filed return.

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Annualized Income Installment Method

If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method.

The annualized income installment method annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. To see whether you can pay less for any period, complete the 2015 Annualized Estimated Tax Worksheet (Worksheet 2-9).
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Old 01-04-2016, 05:05 PM   #30
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Haven't done estimated taxes yet. Just do withholding on IRA withdrawal.
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Old 01-04-2016, 05:24 PM   #31
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Since I ERed back in late 2008, I have made estimated tax payments only in the 4th quarter (except for 2010) and have never filed any Form 2210. Except for 2010 when I had a spike in my income due to a large, midyear short-term cap gain distribution, my tax bill has been between $1,000 and $2,000. I have paid just over half of it in the 4th quarter and the rest in the following April.


As you know, the 4 "quarters" are not equal in months. Instead of 3-3-3-3 they are 3-2-3-4. And with more of my income near the end of the year, my income is more skewed toward that 4th time period.


Perhaps I am flying under the IRS radar because I pay less than $1,000 the following April even though my original taxes due were slightly over $1,000. The IRA has never bothered me so I will just keep on doing what I am doing.
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Old 01-04-2016, 05:26 PM   #32
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Haven't done estimated taxes yet. Just do withholding on IRA withdrawal.
My friend has an inherited IRA and we arrange to use his RMD to pay taxes on his (inherited) brokerage account's income to stay in a safe harbor and avoid penalties. In other years he had to still pay some estimated taxes but for 2015 it was more than enough so he actually was able to keep about 10% of the RMD this time.
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