I have a side business, so I pay estimated taxes (filed with my personal taxes via Schedule C). But for my full-time, day job I’m in sales, and my quarterly sales bonuses can be very unpredictable. Overall my yearly bonus amount can range from $72k at lowest to $227k at highest, with a large amount of that difference typically paid out in a single quarter (often but not always Q4). For example, this year I may or may not get that large additional bonus amount in Q3. My math shows that the higher bonus amount can result in an additional $20k owed to Federal and $7.7k owed to State. I'd like to know the easiest way to handle this type of situation without the burden of significantly overpaying estimated taxes should my bonus be lower, or the risk of penalty for underpaying should it be higher.
My simple idea is to just plan on paying quarterly estimated taxes on an assumed yearly base bonus of $72k, but bump-up my quarterly payment if/when a larger quarterly bonus comes in. That way by the end of the tax year I will have paid everything I owe. Does that make sense? What are the risks?
