Quote:
Originally Posted by kaneohe
Thanks, audrey..............I know you have lots of experience so I was hoping you'd answer. What is your experience using your rule of thumb in paragraph 1.......
if I estimate the full yrs tax, then pay 90% less the prior 3 qtrs of estimated tax,
does the 2210 confirm that you owe no penalty? I was actually planning on paying 95% less the prior 3 qtrs for a bit of safety.
I'm the tax software in my case and the software got lazy. I actually tried a dry run on the 2210 but that form reminds me of the QDIV/CG wksht....each step is easy but easy to make 1 mistake and mess the whole thing up. I thought it would be easier this yr........only have to worry about income timing.....don't have to worry about deductions or AMT..........but even just the income timing if you want to do it carefully is a bit of a chore.
Anyway.......very interested in your experience w/ your rule of thumb. Based on the crude run on the 2210, looks like the first 3 quarters are overpaid so that's why I was thinking 90% of the final taxes w/ the Q4 estimate would be ok.
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I would say that if you overpaid estimated taxes according to your YTD income each quarter using the annualized method which is what 2210 does, then you should not owe any penalty as long as you pay 90% of what you owe for 2018 by Jan 15 2019. I've done that before. I don't see how it could be otherwise.
I guess the deal with the annualized income method is that you total your income YTD for each IRS quarter (March, May, August), then you annualize your income by multiplying by 4, 2.4, and 1.5 for each of these three quarters, and then compute the tax due on that amount. That is the test for whether adequate estimated tax was paid for each quarter.
The trick is accurately estimating your taxes. I usually don't have the full picture of what is the qualified dividends total, nor additional dividend income due to foreign tax paid nor the foreign tax numbers. So I do err a bit on the conservative side - often using prior year numbers as a guesstimate.