I am looking for advice on how to prepare estimated taxes for 2026. My issue this year is that I had a large capital gain in Q1 and I expect my income will continue to be uneven and somewhat unpredictable during the year. (Note: Only a small portion of my income is predictable and subject to withholding tax.)
There are a couple of alternatives:
1. Use the 100%/110% safe harbor rule.
2. Complete form 2210 Schedule AI to annualize my income.
The safe harbor rule can work but I have two concerns about it. First, due to the large gain in Q1, my tax liability in 2026 is going to be much larger than it was in 2025 (like 2 or 3 times). It creates the appearance that I significantly underpaid my estimated taxes which makes me feel a little uncomfortable. Second, there is a risk, albeit small, that if I or the IRS finds an error in my 2025 return that increases my 2025 tax, it will cause a problem in my 2026 return due to the fact that my estimated tax payments will be lower than the corrected tax liability in my 2025 return. This cascading effect is true in other situations where a subsequent year's tax return is dependent on figures from the subsequent year's tax return, such as applying an overpayment of tax from one year to the following year's tax liability.
There are three concerns that I have with annualizing my income via Form 2210 Schedula AI. First, I have never annualized my income before and I am not sure how it works. Second, I don't know if TurboTax Premier supports Form 2210 Schedule AI. Third, the instructions state that annualizing is based on actual income received to date in 2026. I do not have complete actual income for Q1, and won't have it for other quarters as we move forward in the year. For example, I have interest income from my March brokerage statement but I don't have offsets to it such as bond premium and accrued interest. Similarly, I have dividend income, but I don't have the amount that are foreign dividends, the corresponding foreign tax paid and the associated foreign tax credit. There is a fair amount of information I won't have until I receive tax statements/1099s from my broker in 2027.
I would appreciate any thoughts or suggestions you may have.
