Since my retirement, I always paying my estimated taxes evenly throughout the entire year. Because my incomes are mainly from investment and retirement incomes including RMD, some of them are not easy to predict. This year, I had a large amount of incomes from dividends and capital gain distributions at the end of 2024. As a result, I had to pay a larger sum of estimated tax in the 4th quarter than the previous three quarters of the year. In order to avoid tax underpayment penalty, I had to use Schedule Annualized Income (AI) of the IRS form 2210. Below are some of my understandings, which I would like to have feedback from people, who are more experienced than me, here to tell me if they are correct or not.
- Dividends and capital distributions only become my taxable incomes when they are distributed.
- RMD also becomes my taxable income when they are withdrawn. (As I always withdraw them at the end of the year, I don't need to pay estimated tax in the first three quarters of the year.)
- When I use RMD as tax payments, they are viewed as evenly distributed through the entire year no matter when they were being withdrawn.
Thanks in advance for your help!
