pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1
I can understand stopping at line 4 and not filling Sch AI at beginning of yr if you didn't expect that large late-yr income. What I don't understand is how you had tax owed in Q1/Q2 if you didn't have enough income in those quarters to have any tax owed for yr. based only on those early quarterly income flows.
(and annualized)
I wasn't under the impression that a Q4 income spike can cause estimated taxes to appear in earlier quarters.
If estimated taxes are not underpaid for the year, you may not be required to fill out form 2210. That is different than saying the tax payments have no firm due date.I've paid them in the past after the due date and have never been fined.
What is the guesswork? You do a computation for each tax period and save your work.
You pay whatever is indicated.
The guesswork goes back to two lines on the worksheet for Form 1040ES, the estimated tax form, the "parent" form of Form 2210. This worksheet is the one I fill out at the start of the year. The first line is Line 1, "Adjusted gross income you expect in [year]," and the second line is Line 11b, the line which lists all the tax credits including the premium tax credit.
At the start of the year, I expect to receive a premium tax credit because I expect my (M)AGI to be low enough to qualify for said credit. The subsequent calculations from entering these expected amounts (i.e. "guesswork") are the same here as on Part I of Form 2210. On this worksheet, using the estimated AGI and PTC, I end up hitting one of the "Stops" on Line 14a/b, the ones which tell me not to make any estimated tax payments.
But then near the very end of the year, I get this huge, unexpected spike in my income which greatly boosts my taxes due and sends me over the PTC cliff, wiping out the PTC. Then, Form 2210, which looks back on the year's income and PTC, says I should have been making estimated tax payments the whole year. Form 2210 makes no sense if Form 1040-ES, when its similar worksheet was completed at the start of the year, indicated that no estimated tax was due in any quarter going forward.
This year is my first year paying quarterly taxes and I finally figured out that they are not actually due "quarterly".
........................................ Form 2210 makes no sense if Form 1040-ES, when its similar worksheet was completed at the start of the year, indicated that no estimated tax was due in any quarter going forward.
In early December I sketch out my tax return for the year in Excel and I update it occasionally during the month... in late December I'll do a tIRA distribution to pay my estimated tax for 2019.... since it is a withholding the IRS and the state count it as having been made evenly throughout the year so I don't have to worry about underpayment penalties or do that pesky Form 2210 Schedule AI.
P.S. Doesn't work for those under 59 1/2 unless you don't mind the 10% early withdrawal penalty.
I could understand Scrabblers situation if the first 3 "quarters" tax calculations and "expected total income" tax came in under $1000 total and then the late in the year capital gains distributions cause the loss of PTC which boosts him way over $1000 total tax safe haven.
I think the problem is that there are 2 kinds of safe harbors:
1) a "hard" safe harbor: based on prior yr numbers like 100(110)% of last yrs
taxes. If you do this one and meet it, you're safe because you know exactly what you need to pay.
2) a "soft" safe harbor: based on current yr numbers.....as you know there can be uncertainty about this yrs numbers......sometimes a lot. Owing less than 1K for current yr is that kind of uncertain safe harbor so it can make no sense in reality.
This might explain why you got some small estimated payments in the early quarters when you did Sch AI. Your safe harbor was probably based on prior yr taxes when you probably did pay taxes. Even if you paid only 800, your safe harbor would be 800 or 200/qtr , but not 0.
As suggested by both Montecfo and audreyh1, either grab the "hard" safe harbor or continually monitor your situation during the yr, esp. Q4.
..............................
What I do not want to do, for sure, is to pay a whole lot in estimated taxes in the 4th quarter (or throughout the year), assuming I will not qualify for the PTC, then end up qualifying for the PTC and have to file for a refund in April (or sooner) of what I just gave the IRS. To me, that is just dumb, dumb, dumb!
..................................................
I have started doing this (thanks to you, who gave me this idea). My different twist is that if my retirement accounts appear to be at a "peak" (my definition of a "peak" being they have grown beyond what I expected/need from them this year, not trying to time the market), I will make a withdrawal for estimated taxes. Since this is the first year I am doing this, I will see how it works out.
(emphasis added)I have started doing this (thanks to you, who gave me this idea). My different twist is that if my retirement accounts appear to be at a "peak" (my definition of a "peak" being they have grown beyond what I expected/need from them this year, not trying to time the market), I will make a withdrawal for estimated taxes. Since this is the first year I am doing this, I will see how it works out.
.....................................
The $1,000-taxes-due safe harbor can have other quirks. My taxes due have often been either just above or just below $1,000. If it's under $1,000, then I can simply pay the whole amount in April. But suppose it is just over $1,000, say $1,020, and I don't meet any of the other safe harbor provisions. Then, in theory, I would have to pay $255 each quarter for 4 quarters. Pretty weird huh? .........................................................
You could assume you qualify for PTC and pay estimated taxes accordingly. When you find out in Q4 that you don't, you can file the big Q4 payment and you should be ok if Sch AI agrees......you can calculate the payment so that you are ok but still owe in April.
If I qualify for PTC (now), I won't owe any estimated taxes because I am not getting the PTC on an advanced basis. I'll either owe a bunch if I go over the cliff (and pay some estimated taxes in 4Q, I just pay about half) or get a refund in April if I don't. Schedule AI will play no role.
won't you potentiallly be liable for penalty if est taxes not paid evenly during yr and you don't file Sch AI? I think you said you've never been penalized but that doesn't mean you could not be in future?
But that's my Catch-22. The worksheet to 1040-ES, when I fill it out at the start of the year, has me not needing to pay any estimated taxes at all, in any quarter. Then, I get hit with a big, unexpected cap gain distribution in December which would change the 1040-ES worksheet (which is the same as Part I of Form 2210, the test to see if any estimated taxes are due) and force an appearance of Sch AI with its estimated taxes due in at least one back quarter. That's what I would explain to the IRS in the unlikely event if they ever tried to penalize me.