Some individuals and businesses don't receive income evenly throughout the year. For example, if you own a pool service business, the bulk of your income likely comes during the summer months. Owners of these types of businesses have the option of using the annualized income installment method to calculate their estimated quarterly tax payments.
This method allows you to estimate your tax for each quarter based on your income and deductions rather than paying four equal installments.
If you elect to use this method, you must include Form 2210 with your tax return.
To see whether annualizing will reduce your penalty, visit the Underpayment Penalty section of TurboTax under Other Tax Situations.
To review underpayment penalties, in TurboTax Online:
- Open return and choose Other Tax Situations
- Choose Underpayment Penalties
- If asked "do you want to review estimated taxes" choose Yes
- If a penalty was calculated, you should see the option to annualize to possibly reduce penalty
See this TurboTax tips article for more information about Form 2210.
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