Large, one-time increase in income and estimated payments for the following year.

[glerbnik84]

If you have a large, one-time increase in income for a tax year, and your income will drop back to normal in the following year, are you nevertheless stuck paying a large estimated tax payment each quarter in the following year?

Or, can you simply increase your withholding to exceed the 90% withholding threshold to place you in safe harbor?  (I would opt to adjust my withholding to be well above the 90% tax bill I would estimate to owe for the following year.)  

I realize there is a risk of having to pay a large penalty if some unexpected financial windfall magically appears.

[MindyB]

No, you aren't stuck with a large estimated tax liability the following year, you can make estimated based on 90% of actual income.  As you mentioned, if you happen to mis-estimate, you won't be covered under safe harbor if your income is larger than you thought it would be when you prepared your estimates. 

There are several ways to do update your estimates.  You can either directly decrease the payments online at eftps.gov (no voucher needed); change the vouchers you printed manually; print vouchers and fill in as desired from the IRS 1040-ES; or update in TurboTax and reprint. 

Here is how to update in TurboTax Online:

1. Navigate to Federal Taxes > Other Tax Situations
2.  Go to Other Tax Forms
3.  Start or Revisit Form W-4 and Estimated Taxes
4. Continue past the W-4 section to get the estimated tax section, Estimated Taxes for 2025 
5. You will be asked if you want to adjust  your income or deductions, answer yes, and manipulate the answers to increase your tax (in other words, estimate down income)

[glerbnik84]

Thank you very much for the quick and clear reply.  I now know how to proceed.

Sincerely, 

glerbnik84