Annualizing Income for Underpayment

[PranavJain]

I am dealing with an underpayment issue. I was thinking about using the Annualizing Income option to reduce the underpayment issue. 

Would doing that increase the chance of an audit?

In TurboTax, for each section they ask for I had some questions:

Annualized Adjusted Gross Income

Net Capital Gains

 - What constitutes Qualified Dividends. Where can I find this information vs other dividends?

Deduction for Qualified Business Income

 - Where do I see this information and how its divided quarterly?

Other Taxes

 - I see a tax amount in this area but I cannot see where it is from or how to identify which quarter the taxes are present in.

Other Credits 

 - I have a credit amount here but I cannot see where it is from or how to identify where which period the credits are present in.

What are some other cons to using the annualized income instalment method vs the regular way?

[DianeW777]

No, using the annualized income method would not cause an audit.

1. Qualified Dividends will be on your 1099-DIV and if you believe they were earned evenly through the year you can divide by 12 months then multiply by the number of months in the requested period.
2. Check Form 8995 for the amount of qualified business income (QBI) - Again if business income was earned evenly throughout the tax year use the formula above, otherwise you will need to determine the months the income was earned (net profit of the business).
3. Other taxes could be your self employment tax if you have a profit on your business - you would calculate the amount for each period the same as 2. above.
4. There aren't really any cons, the most important reason to use this occurs when you have made most of your money in the last quarter of the year.  The IRS tax system is pay as you go, so if most of your income is in the last quarter then it's a strong possibility the penalty would be significantly reduced.
   1. Form 2210 and Instructions