Q. If I use annualized installment for estimated taxes, is it true that on June 15 IRS wants 1/2 of projected yearly taxes with only 5 months of withholding?
A. No. You may use the annualized method to make your estimated payments. So, your 1st and 2nd quarterly payments can total less than half your tax for the year, as long as it covered the tax due on your income for the first 5 months. TurboTax cannot do that. You will have to calculate the quarterly payments manually. Doing so will require you to prepare form 2210 when you file your 2022 tax return.
Q. What prevents me to ignore all that and make just one giant estimated payment on Jan 15? It is not hard to make sure it is over 90% I owe, so no underpayment penalty. Is there a catch?
A. The real question is "are the IRS computers sophisticated enough to catch that?" I don't know for sure, probably. I do know that TurboTax is not that sophisticated. It will not calculate a penalty in that situation.
Here is a gimmick that does work (if your employer will cooperate): increase your late year withholding to cover the extra taxes. The rule is that withholding is treated as paid evenly over the year, but estimates are only credited to the quarter actually paid.
