Paying estimated taxes when sales bonus varies

[BizOwner15]

I have a side business, so I pay estimated taxes (filed with my personal taxes via Schedule C). But for my full-time, day job I’m in sales, and my quarterly sales bonuses can be very unpredictable. Overall my yearly bonus amount can range from $72k at lowest to $227k at highest, with a large amount of that difference typically paid out in a single quarter (often but not always Q4). For example, this year I may or may not get that large additional bonus amount in Q3. My math shows that the higher bonus amount can result in an additional $20k owed to Federal and $7.7k owed to State. I'd like to know the easiest way to handle this type of situation without the burden of significantly overpaying estimated taxes should my bonus be lower, or the risk of penalty for underpaying should it be higher.

My simple idea is to just plan on paying quarterly estimated taxes on an assumed yearly base bonus of $72k, but bump-up my quarterly payment if/when a larger quarterly bonus comes in. That way by the end of the tax year I will have paid everything I owe. Does that make sense? What are the risks?

[Vanessa A]

Yes, you could calculate your taxes due based on the $72k base bonus until you see your bonus will be higher.  Then if it is higher, you will pay the additional amount in the quarter you receive the higher bonus.  

If you do not want to overpay by a large amount this is the best way to do it.  When you go to file your taxes, if you have one quarter where your bonus is larger, then you would simply need to file form 2210 to annualize your income showing the IRS that you paid what was due when it was due based on your income not being equal throughout the year.  Doing this would avoid any underpayment penalties. 

As long as you make the payments based on the income you received for the quarter, there really is not a risk.  It will just be one additional form attached to your return that you can easily fill out on TurboTax.  In fact, TurboTax will get to a screen if you have an underpayment penalty that says lets see if we can waive this penalty, then you will walk through the steps of entering when you received what.  It would be a good idea to keep a log of your income by quarter to make it easier when you go to fill out form 2210.