Estimating taxes when income varies.

[pkleeberg]

I have calculated my estimated taxes for 2021, however my income changed as of May significantly. Based upon my calculations for the year when I look at paying 90% of what is owed I do not owe any estimated taxes. At 100%, I do.  If I choose to pay @ 100% but the first payment is past. How do I calculate the individual payments since there will only be 3 and, if my income continues to vary through self-employment, how do I pay estimated taxes in that instance?

[VolvoGirl]

Well you already missed the first 2 estimates.   Just pay the 3 & 4 if you think you need to.  They are optional.  To adjust them You can just cross out the amounts and write in a new amount.

To just estimate the remaining quarters put in that you paid $1 for the missed quarters so it will only calculate the remaining quarters.

To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online returns, if you can't get back into your return, Click on Add a State to let you back into your retun.

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 (Desktop H&B)

Other Tax Situations

Other Tax Forms

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

Or Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

[Mike9241]

take 100% of your estimated total taxes for 2021, subtract your estimated withholding for the full year. this leaves you with your estimated tax requirement for 2021.

since you want to be at 100% multiply by 75%. this is what you would have paid cumulatively through the 3rd quarter and subtract the estimates you already made. pay this on or before 9/15/2021. you can mail in the payment with voucher 3 or you can go online and use IRS Direct Pay and thus avoid the chance of the payment getting lost in the mails but you do bear the responsibility of entering correct info on the website.

https://www.irs.gov/payments 

for the 4th quarter due 1/15/2022 substitute 100% for 75%.

since your payments have been uneven you still might have an underpayment penalty.  there is the annualized installment method on Form 2210 you may be able to use when you file your 2021 return to reduce or eliminate any penalty.  https://www.irs.gov/pub/irs-pdf/f2210.pdf  look at page 4 to see what is required to use this method.

[pkleeberg]

Thank you so much.  Excellent advice.

Paul

[Opus 17]

Your total paid into the system must be equal to either,

• 90% of your liability for 2021, or
• 100% of your liability for 2020, or
• 110% of your liability for 2020 if your 2020 AGI was more than $150,000.

If you're having trouble getting a handle on your 2021 numbers, you can focus on 2020 instead. 

[pkleeberg]

All three of these replies were excellent and, taken together, exactly what I needed.  Because I will need to pay an AMT due to exercising an ISO, I calculated it based on 110% if 2020 taxes.