How to determine quarterly AIG?

[JamesInGA]

TurboTax is asking me to fill in quarterly AIG amounts for 2023, presumably to see if I need to pay the penalty. I have a corporate job, and my wife owns her own consulting business. We have no clue how much she's going to make every year, so what I've been doing is taking my expected income for the year, adding her income at the end of the quarter, determining the taxes, subtracting what I expect to pay in taxes for the year, and then paying that amount for the quarterly estimated taxes. There is no other way I can do this when she could make $500k or $50k; it's unknown year by year.

All that being said, how do I calculate the quarterly AIG? I can take my Fed taxable income that quarter, add her income, and then what? Do I subtract a quarter of the standard deduction and business expenses for that quarter?  Am I trying too hard here?

[Mike9241 · Accepted solution]

the quarters aren't really quarters. the periods are

1/1-3/31

4/1-5/31

6/1-8/31

9/1-12/31

best to use form 2210 page 3 the annualized income installment method 

For the first period, you take your wages,  her earnings plus any other income and multiply by 4. (to simplify you subtract your standard deduction for the year unless you want to use itemized deductions actually incurred for the period and annualized them, from the annualized income subtract the annualized deduction and compute income and self-employment taxes on this income. Then deannualized by dividing by 4.Multiply the resulting total deannualized taxes by 22.5% and subtract your withholding for the period. that's your first quarter estimate due 4/15

For the second period, you take your wages,  her earnings plus any other income and for the period 1/1/-5/31 and multiply by 2.4. (to simplify you subtract your standard deduction for the year unless you want to use itemized deductions actually incurred for the period and annualized them, from the annualized income subtract the annualized deduction and compute income and self-employment taxes on this income. Then deannualized by dividing by 2.4. Multiply the resulting total deannualized taxes by 45% and subtract your withholding for the 1/1-5/31. that's your second quarter estimate due 6/15

for the this period 1/1-8/31 use the factor 1.5

subtract your withholding for this period, this is your third quarter estimate du e 9/15

for the year the the factor is 1

again subtract your withholding for the year. this is your fourth quarter estimate due 1/15 of the following year.

i tried to present the format for avoid ing penalties for underpaying estimated taxes when ince and deductions vary from period to period.  there are basically two safe harbors

1) withholding for the year and timely estimates equal 100% of the prior year's tax. that jumps to 110% if your  prior year's tax if your adjusted gross income for the prior r year was over $150K

so  it's that number for the prior year's tax less your withholding for the current year equals your required estimated tax payments to be penalty proof. 1/4 of the estimates must be paid by each date provided above 

2) withholding for the year and timely estimates equal 90% of the current year's s tax. 

so  it's that number for the current year's tax less your withholding for the current year equals your required estimated tax payments to be penalty proof. 1/4 of the estimates must be paid by each date provided above 

obvious you don't know 2 until the year is over, so you can use 1) or the 2210 AIIM