Annualized Income Quarterly AGI

[kwanghyunlim]

I'm annualizing my income because I had capital gains in the fourth quarter and would pay an underpayment penalty if I don't (I had made the estimated tax for the capital gains in that quarter). I have income from a job as well. On the "Federal and CA AGI Adjustments" page, TurboTax asks for the AGI for quarters 1 to 3. Do I simply take the AGI minus the capital gains and divide by four and enter that amount for those fields? I have the same question for the "Itemized Deductions" page.

Please say it is because I have no idea how I can even begin to calculate the quarterly AGI and deductions. 🙂

Thank you in advance.

[MaryK4 · Accepted solution]

To get the correct adjustment for quarters 1 to 3, you first want to subtract out the capital gain amount that was included in quarter 4- because the capital gain is included in the AGI.  After you do that, you can use a quarter of the AGI less Cap Gain.  For the Itemized Deductions your calculation will work since in general they should have been spread out evenly through the year.  

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. 

[kwanghyunlim]

MaryK1101, thank you very much!

[swjohn95051]

Hi, MaryK4

I am in the same situation as kwanghyunlim.  when I calculate the AGI for each period by myself, do i  need give IRS  my detailed calculation process ?

[TeresaM]

Form 2210  calculates penalties for underpayment of estimated taxes and is completed in the Other Tax Situations on the left menu.

1. Next, scroll down to Additional Tax Payments and click on Show More
2. Click on Underpayment Penalties

This is from Form 2210 Line C  Your income varied during the year and your penalty is reduced or eliminated when figured using the annualized income installment method.  To change the entries, look for the screen that says Annualized Income Method.

You can select No or if you select Yes, it will pull up this screen to enter the amount for each quarter.

If this does not help you resolve the issue, please give us more details, so we may better help.