Hi,
I have upcoming variable CA sourced income in 2024 that I cannot withhold on (no more W2 CA income), and I'm trying to satisfy the CA requirements for estimated tax. Suppose, the income needs $500 more tax to CA per month, but it can increase or decrease in Q2, Q3, and Q4. Projecting this for the year, if my income remains the same I'd need to pay $6000 total tax, split $1800 in Q1 (30%), $2400 in Q2 (40%), and $1800 in Q4 (30%).
I think the safest way for me to deal with the variable income is to overpay in Q1 and Q2 based on a highest-case assumption (e.g. assuming the income doubles later this year), and then correct in Q4 if the income is lower than expected. That is, I plan to pay $2200 in Q1 and $2600 in Q2, and in Q3 and Q4 catch up once I know more of the income. In this case, if my income stays the same, could I just pay $1200 in Q4 (to total to $6000)? If I were to read the CA FTB webpage (https://www.ftb.ca.gov/pay/estimated-tax-payments.html), I'd owe a penalty next year because in Q4 I'd need to pay 30% of $6000, but if I were to interpret it instead to say that I need a cumulative 30% by Q1, 70% by Q2 and Q3, and 100% by Q4, then I would be fine as I overpaid Q1 and Q2 to offset this.
Most other threads here say that the Federal estimated tax is cumulative: if you overpaid in Q1 and Q2 you can underpay in Q4 to offset it, and it will be fine. Could someone confirm that CA FTB allows you to treat it cumulatively too, that is, if I overpay Q1 and Q2, then in Q4 I don't need to pay the full 30%?
