Thanks but our penalty would be higher if we did not annualize. When annualizing I added the quarterly income totals cumulatively by including the prior quarters income to the subsequent quarters – so that was done correctly. What the form is doing is taking our first quarter income and multiplying it by 4 crediting the standard deduction against this amount then taxing us as if this (first quarter times 4) amount was static throughout the year and is taxing us at 22%. The form divides the year’s tax owed by 4 and uses this amount to determine a penalty. If I take our actual combined income for the 1st and 2nd quarters apply the standard deduction we would be at 12% on the tax tables and our 1st quarter withholding covers the taxes that we would owe. The penalty is being generated because our 1st quarter earnings were much higher than the second. If our 1st and 2nd quarter earnings were reversed we reduce the penalty, but the 2nd quarter estimated payment required is disproportionately high to the amount of income and still generates a penalty.
