Uneven income

[evalucia]

IRS charges a fine if you do not make equal quarterly self-employment tax payments. My income is not evenly distributed over the year so I make uneven payments. 1. Will T.Tax software let me produce Form 2210 where I can mark the choice, in Part 2, C "Your income varied during the year and your penalty is reduced or eliminated when figured using the annualized income installment method" 
2. Will T.Tax let me input my information in order to complete Section Schedule AI—Annualized Income Installment Method?
3. Will the IRS will use the annualized income method for Net long-term capital gains that I received unevenly throughout the year?

[Tax Hero Niki]

HI evalucia!

I love to see how much research you have done on this topic so far.

Yes, Yes, and Yes!

1. Yes. Navigate here in the program -> Federal -> Other Tax Situations -> Estimates
Be sure to check out the same section within the State section of the program, too.

2. Yes, this is covered.

3. Yes, several methods are permissible, and the program will walk you through them.

[evalucia]

Thank you so much! You have lifted a weight off my shoulders!

[MarthaT]

Great question and very complicated.   To answer your question Turbo Tax will allow you choose the Annualized Income method.   You need to go to Other Tax Situations/ Additional Tax Payments/ Underpayment penalties/Continue/NO if not Farmers & Fishermen/2022 Filing Status/2022 Tax Liability/2021 Adjusted Gross Income/Annualized Income Method (YES).

For your Net long-term capital gains that you received depends on your income since it will be tax at a different rate (0%, 15%, or 20%). You can find more at https://www.irs.gov/taxtopics/tc409

[asc]

Hi - can someone please help.

I have experienced extremely uneven income streams in 2024 that were especially low in three earlier quarters but then (fortunately) appear to be compensating in the fourth quarter.  I made estimated quarterly payments proportional to those lower income streams, and now I am trying to model my 2024 taxes using Turbotax23 Desktop (Business version). 

As expected, the regular Turbo tax calculation has a large tax penalty due to underpayment of the first 3 quarters based dividing the estimated annual income evenly.  I know that if I could correctly specify the quarterly income streams as they were received, the interest penalties would go away.

Tax Hero Niki said on August 2023 to "Navigate here in the program -> Federal -> Other Tax Situations -> Estimates".    However, the closest I could find in my TurboTax23 Desktop Business was the Estimates option under Personal / Deductions & Credits / Estimates & Other Taxes Paid, and all it had was the standard ability to make quarterly and other payments.  There was absolutely nothing I could find there on how to adjust your quarterly income stream so as to not pay interest penalties for uneven Estimated payments.

I have also looked under Personal / Other Tax Situations, but there is nothing there that comes close to this topic either.

Can someone please tell me where to find an option within Turbotax23 Desktop Business to adjust income streams based on when they were received? 

Thanks in advance.

UPDATE -- I just found the lower-down Reply by Martha T on the Annualized Income method and the instructions to look under "Other Tax Situations/ Additional Tax Payments/ Underpayment penalties/" are exactly correct.  I've entered my actual income streams and saved hundreds of dollars.  THANK YOU Martha T. 

[VolvoGirl]

In the Home & Business program you don’t have Federal tab. Instead of Federal you have Business and Personal.  So find Other Tax Situations under Personal. 

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say NO to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….

Federal Taxes or Personal (Deskop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

I have Home & Business too.  I use the What-if worksheet each quarter to adjust my estimates.   When you actually fill out your 2024 return if it gives you an underpayment penalty,  you might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button