How do you do estimated taxes ?

[mickeyd]

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.

 

[N02L84ER]

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.

 

[audreyh1]

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.

 

[pb4uski]

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.

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).

 

[gerntz]

Haven't done estimated taxes yet. Just do withholding on IRA withdrawal.

 

[scrabbler1]

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.

 

[scrabbler1]

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.