We have several sources of non-W2 income:
- My spouse is self employed with a somewhat unpredictable income stream
- We receive large erratic dividends + capital gains from several investments
- We actively sell stocks and bonds resulting in capital gains (and occasionally losses)
For the above items, unless I'm misunderstanding the rules, the IRS seems to want us to pay 4 equal estimated tax payments even if we have no idea what the aggregate of these will be at the end of the year? All we can do is take a snapshot at the end of each quarter and write an estimated tax payment for that particular quarter which may vary wildly from the previous quarter. But, like I said, I do not know if un-equal estimated tax payments are penalized even if using the above strategy makes complete sense for our situation. When I have tried to do this strategy in the past, I seem to end up with a small penalty simply for making un-equal payments (even though we actually overpaid our taxes and were receiving a refund!).
What should we do in this case?
Note that electing to do safe harbor as a workaround is not an option for us this year because we had a one-time very large income last year, so if we used safe harbor we would be extremely overpaying on estimated taxes which we don't want to do.
