DianeW777
Expert Alumni

Get your taxes done using TurboTax

Yes, it could be correct. If nothing was withheld or paid as federal withholding by the company and if you did not pay any estimated tax for that portion then an underpayment penalty could exist.

 

The annualized income method could reduce or eliminate your penalty because the income was in the last quarter of the year.

 

To get the correct adjustment for quarters 1 to 3, subtract out the fourth quarter income amount that was included in the 4th quarter. it wasn't received until quarter 4.  Include the fourth quarter income only in quarter 4. If you use itemized deductions you will calculate those as indicated for each quarter.

 

The annualized income installment method annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. 

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