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Old 10-24-2020, 05:50 AM   #21
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Originally Posted by JARON46 View Post
I Make my estimated tax payments (EFTPS) monthly on my pension, SS, interest and dividends. I keep a running spread sheet on what I estimate my taxes to be.
Sometimes I change the amount that I pay monthly. I have been doing this for 3 years and have had no complaints from IRS.
So when you fill out taxes paid in your tax return, you have 12 different entries instead of 4?
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Old 10-24-2020, 05:57 AM   #22
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Originally Posted by audreyh1 View Post
So when you fill out taxes paid in your tax return, you have 12 different entries instead of 4?
I just checked I have been paying monthly since 2013.
When I fill out my taxes I total up my taxes paid each quarter and enter them.

So no I do not have 12 entries, I have 4 entries
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Old 10-24-2020, 08:30 AM   #23
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Thanks everyone. Sounds like the consensus is the quarterly payments do not have to be equal, as long as I don't underpay my taxes. If I do underpay, then I can avoid penalty by filing form 2210? Is that right?

Since the bulk of my "income" is from rolling funds from a pretax IRA to a Roth IRA and I want to pay taxes separately from post tax funds, the option of using an IRA to pay taxes doesn't work for me.
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Old 10-24-2020, 09:00 AM   #24
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Since I retired 12 years ago, a disproportionately large portion of my income has always been in the 4th quarter. As a result, I make estimated tax payments only for the 4th quarter (except for one year when I had a large cap gain distribution in late June).


Three reasons for this:


(1) The 4 "quarters" aren't really all 3-month periods. Instead of 3,3,3,3 months they are 3,2,3,4 months, so already there is a bias favoring the 4th quarter (it's 1/3 of the year).


(2) With many funds making their lone or at least largest distribution at the end of the year, all or most of a fund's taxable income will be in the 4th quarter.


(3) I have sometimes not had to make any estimated tax payments throughout the year because the anticipated ACA premium subsidy put me into a safe harbor which had me "Stop," as the estimated tax form's and Form 2210's instructions directed me to do. When unexpectedly large late-year distributions pushed me over the ACA income cliff, not only did my income rise but the subsidy which would have offset some or all of it went away. I then made a fairly large 4th quarter payment to pay some of the large tax bill.
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Old 10-24-2020, 09:13 AM   #25
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As an RE Agent i make quarterly payments of 25% of that quarters income. Since I have no idea what next quarters earnings are going to be all of my payments are unequal.
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+1

We make payments based on income during the given quarter. Never any complaints from the IRS.

ETA: I think we've received a refund each year we've been paying estimated taxes
I owe zero tax up to the point in December when I pull or convert from tIRA style accounts. If the custodian allows it, I set withholding to equal my tax obligation. But I've run into a problem in doing withholding in the past, and instead made an estimated tax payment. Never penalized and never filled out a form to document lumpy income. The state of NC tried to penalize me once, but I pushed back, and they went away.
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Old 10-24-2020, 10:32 AM   #26
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Thanks everyone. Sounds like the consensus is the quarterly payments do not have to be equal, as long as I don't underpay my taxes. If I do underpay, then I can avoid penalty by filing form 2210? Is that right?

.....................................
The basic idea is that IRS wants payments to be based on when your income is received. The default IRS assumption is that your income is received evenly during the yr. Hence the expectation of equal quarterly installments.

If you pay in non-equal payments, you will have to demonstrate via F2210 that you paid according to how your income was received. This works if you received the bulk of your income in Q4 and the major payment was also in Q4.

If your income was received evenly during the yr and you paid in non-equal payments with a big payment in Q4, F2210 won't help you and you may be penalized for late payments for the earlier quarters.
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Old 10-24-2020, 10:46 AM   #27
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Failure to fill out form 2210. I believe their tax preparer should have caught this and requested the additional info to fill out the form. Makes their accountant look bad and should have been resolved with no additional charge.
Maybe so, but that implies an underpayment penalty situation, which is not directly equivalent to variable quarterly payments.

It's clearly possible to have four different quarterly payments and not have an underpayment. It's also clearly possible to have four equal quarterly payments and have an underpayment.

In either situation, a Form 2210 may or may not save or reduce the underpayment penalty, depending on the timing and amount of income in each quarter.

My point being (and maybe I'm belaboring it a bit), the person I originally quoted didn't get penalized for variable quarterly payments (which was OP's question and concern). They most likely got penalized for underpayment.
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Old 10-24-2020, 11:12 AM   #28
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Until I started to take RMDs I nearly always had unequal quarterly payments. I made some attempt to match quarterly income, but quite often found at the end of the year that I hadn't paid enough. I just upped the 4th quarter payment, never bothered with Form 2210, and was never penalized.

Maybe I was lucky. Maybe the IRS puts Form 2210 well down on their priority list. But that's been my experience over many years.
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Old 10-24-2020, 02:54 PM   #29
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Hello, this is my first year to pay quarterly taxes (retired last year). My plan was to not withhold taxes from any of my withdrawals/dividends/rollovers (to roth). Then pay 4 equal payments of $16,500 to cover us up to the $326,000 top end of the 24% tax bracket. I have made three quarterly payments to date (each $16,500). I was planning to pay the 4th quarterly payment of $16,500 in January. I just received a distribution from a deferred compensation account and they held out $10,000 for taxes. CAN I CHANGE MY 4TH PAYMENT TO $6,500 TO HIT MY TAX TARGET? Or will the IRS make me fill out extra forms if my 4th payment is less than the previous three? If I pay the full $16,500, then I will have overpaid by $10,000. thanks,
In general, you may need to fill out more sections of form 2210, to avoid a tax penalty if you don't make an equal 4th estimated payment.

Otherwise, I believe that the IRS will assume that the extra income that your received in the 4th quarter was uniformly earned throughout the year. This could cause the appearance that your 1st 3 estimated payments were too low and thus generate a penalty. It would depend on how much extra income there was in the 4th quarter compared to how close the first 3 quarters estimated payments were to the minimum required.

Filling out the 2210 would show that this is not the case, but you might have to go through the motion. Basically if you file any quarterly estimated payments, then you must be current at every quarter.

I am basically agreeing with what SecondCor521 says in post #27 above which I just saw.


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Old 10-24-2020, 03:27 PM   #30
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... we don't figure estimated taxes and we don't make quarterly payments. Every December we just pay the safe harbor tax amount (100% or 110% of last year's tax) by drawing from our IRAs and having 100% of the draw amount withheld as tax payments.
+1

This is so easy I see no reason to even consider quarterly payments in my case. I’m sure there are reasons that don’t apply to me, so YMMV.

ETA: I have an inherited annuity which I’m still on the five year plan for withdrawing, plus an inherited IRA with RMDs, so even though I’m under age 72 I have reasons to make withdrawals that can be used to withhold taxes from. If you don’t then I can see why estimated taxes make sense.
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Old 10-24-2020, 03:31 PM   #31
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+1

This is so easy I see no reason to even consider quarterly payments in my case. I’m sure there are reasons that don’t apply to me, so YMMV.
The main reason is if your taxable income drops a lot from one year to the next. 100% of previous year's tax may be too much and the taxpayer may not want to lend to Uncle Sam.
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Old 10-24-2020, 03:51 PM   #32
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I have made equal quarterly payments for a few years now and every year I have owed more than the year before due to RMDs starting up. There have been a few times I missed the due dates and paid later (sometimes a couple of months later) and have not had my hand spanked. Maybe I just got lucky but I am hoping the IRS has better things to do since they always get their pound of flesh each year.
That's good to hear, as my DM missed her 3rd quarter payment by a seven weeks this year. When I realized she'd missed it I had her pay right away with her credit card, which meant she also had to pay a $47 convenience fee. I tried to get the payment taken out of her checking account, but the 1040-SR form isn't listed for that type of payment. Sounds like we could have just mailed in a late check, but I didn't want to take any chances.

I've been wondering if she'd get a nasty letter from the IRS about a penalty, but it looks like she's in the clear.
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Old 10-24-2020, 05:08 PM   #33
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In general, you may need to fill out more sections of form 2210, to avoid a tax penalty if you don't make an equal 4th estimated payment.

Otherwise, I believe that the IRS will assume that the extra income that your received in the 4th quarter was uniformly earned throughout the year. This could cause the appearance that your 1st 3 estimated payments were too low and thus generate a penalty. It would depend on how much extra income there was in the 4th quarter compared to how close the first 3 quarters estimated payments were to the minimum required.

Filling out the 2210 would show that this is not the case, but you might have to go through the motion. Basically if you file any quarterly estimated payments, then you must be current at every quarter.

I am basically agreeing with what SecondCor521 says in post #27 above which I just saw.


-gauss
OP has paid est. tax of 16.5K for 1st 3 Qs. Also w/h 10K and proposes to pay est tax of of 6.5K for Q4. Since w/h is assumed paid equally for each qtr OP will be front loading est tax payments: 16.5K, 16.5K, 16.5K and 6.5K.

Since IRS assumes uniform income during the yr, OP will be ok since payments were front loaded and never behind. F2210 .....the flow chart on p.1 says not to send in F2210....that IRS will calculate any penalty.....which will be 0 since payments were front loaded. assumes OP calculated safe harbor correctly.
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Old 10-24-2020, 06:00 PM   #34
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That's good to hear, as my DM missed her 3rd quarter payment by a seven weeks this year. When I realized she'd missed it I had her pay right away with her credit card, which meant she also had to pay a $47 convenience fee. I tried to get the payment taken out of her checking account, but the 1040-SR form isn't listed for that type of payment. Sounds like we could have just mailed in a late check, but I didn't want to take any chances.

I've been wondering if she'd get a nasty letter from the IRS about a penalty, but it looks like she's in the clear.
You wouldn't get such a letter or penalty in the middle of a tax year. When they get your tax return, they will take a look at how much you owe in taxes, and whether you made appropriate estimated taxes on time, and then they may penalize you for missing a quarter estimated payment since I think they apply the next payment to the next quarter.

Tax prep programs should tell you if one is due. It very well could be that if you fill out form 2210 you won't have a penalty. If you're like me, the bulk of income comes in the 4th quarter with EOY mutual fund distributions, so you may be ok with the delayed payment.

2210 is kind of a pain, but if you aren't itemizing deductions and have good records on all income received, it's just a little time consuming. In any case the penalty usually isn't too bad if 2210 doesn't cover it, or you don't want to deal with it.
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Old 10-24-2020, 06:10 PM   #35
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In general, you may need to fill out more sections of form 2210, to avoid a tax penalty if you don't make an equal 4th estimated payment.

Otherwise, I believe that the IRS will assume that the extra income that your received in the 4th quarter was uniformly earned throughout the year. This could cause the appearance that your 1st 3 estimated payments were too low and thus generate a penalty. It would depend on how much extra income there was in the 4th quarter compared to how close the first 3 quarters estimated payments were to the minimum required.
Exactly. If most of your income is in Q4, and you pay little to no estimated taxes for prior quarters, the IRS will assume underpayment for those prior quarters and calculate a penalty. Providing form 2210 demonstrates that you actually received most of your income in Q4.
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Old 10-24-2020, 06:12 PM   #36
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I don't know if this works for you, but we don't figure estimated taxes and we don't make quarterly payments. Every December we just pay the safe harbor tax amount (100% or 110% of last year's tax) by drawing from our IRAs and having 100% of the draw amount withheld as tax payments.

The key to this is that withholding is considered to have been paid over the whole year, so no need to worry about quarterly payments. The 1099s list the withheld amounts and you just plug them into the appropriate boxes in the forms.

Worst case is we overpay a little, but with interest rates at zero that is not particularly painful. Actually, my sloth usually continues and I just let the gummint keep small overpayments and apply to the next tax bill.
OldShooter, This makes all kinds of sense to me. I'll ask my accountant to figure the number and ask how it should be paid. As pointed out above, we've always just tried to "over pay" so we wouldn't get into trouble with IRS. Sounds like there's a way to keep them happy even if you end up paying a bit to them once taxes are figured (I like your term: Safe harbor.) Sometimes we get back a TON which is a ridiculous way to keep from "enraging" the IRS. Thanks.
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Old 10-24-2020, 06:25 PM   #37
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You wouldn't get such a letter or penalty in the middle of a tax year. When they get your tax return, they will take a look at how much you owe in taxes, and whether you made appropriate estimated taxes on time, and then they may penalize you for missing a quarter estimated payment since I think they apply the next payment to the next quarter.

Tax prep programs should tell you if one is due. It very well could be that if you fill out form 2210 you won't have a penalty. If you're like me, the bulk of income comes in the 4th quarter with EOY mutual fund distributions, so you may be ok with the delayed payment.

2210 is kind of a pain, but if you aren't itemizing deductions and have good records on all income received, it's just a little time consuming. In any case the penalty usually isn't too bad if 2210 doesn't cover it, or you don't want to deal with it.
Thanks for the input. My DH pays four equal payments to cover the payments she gets for the business they sold plus some income from an annuity and dividends. I assumed the late payment would be applied to the balance owed from the previous quarter. I'll be doing her taxes with TurboTax, and will be sure to look into the penalty situation.
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Old 10-24-2020, 06:27 PM   #38
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Last year I overlooked some substantial CD interest for Q2*. The CD paid all at maturity. When I went back to calculate for the final tax filing, I realized I had slightly underpaid estimated taxes for Q2 based on my calcs at the time.

However, after the year closed I also had more detailed information - namely how much of the dividend distributions paid each quarter were qualified dividends. I was able then to provide this more accurate information on form 2210, and it got my estimated taxes down below what I had already paid.

*It was the first time I had missed entering such income in 20 years. I discovered it when the Quicken interest income report didn’t match the tax return and it took some digging. I usually check our tax return (which DH generates via TurboTax) against my estimated tax calcs.
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Old 10-24-2020, 06:31 PM   #39
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I like your term: Safe harbor.
That's actually an IRS term, not OS's, but the term is used correctly. Just so you know that you can search for it and see exactly what the IRS says about it.
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Old 10-24-2020, 06:36 PM   #40
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That's actually an IRS term, not OS's, but the term is used correctly. Just so you know that you can search for it and see exactly what the IRS says about it.
Thanks! Thats why I keep paying my dues to belong to this Community! It definitely pays for itself. Thanks to ALL of you since YMMV.
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