Can I get off the Estimated Tax Rollercoaster?

[Remford]

I occasionally receive sizable restricted stock grants. Because my marginal rate becomes significantly higher than the 22% withheld from supplemental wages (which I’m unable to increase), I owe a sizable amount of tax which I remit at filing.

Because, as a result, the IRS also considers me to be a high-income individual, I also must remit quarterly estimated tax payments during the following year based upon 110% my current year’s tax liability to avoid penalty - despite no such stock grant existing for the following year, which yields an outsized IRS refund in year two after the grant and creates a sizable cash flow rollercoaster.

Does any means exist to declare the irregularity of the income rather than an annual expectation for which such sizable quarterly estimated tax payments would seem more rational? Or does this simply come with the territory?

Thanks in advance for any constructive insight.

[fanfare]

If you are using ES vouchers generated by TurboTax, that is your problem.

First off, the 110% factor applies to your prior year's tax, not current year.

You only have to have paid in 90% of the current year's tax,

not 110% (or 100%) of the prior year's tax, when the former is the smaller amount.

I hope this is constructive.

[Hal_Al]

You can change your 1040-ES. in TurboTax before you print and mail it. although that can be tricky in the online versions.  Just print a 1040-ES from the IRS web site and fill it out by hand (or fill it out at the web site before printing).

You can also pay Federal directly here.  Be sure to select 1040ES:

https://www.irs.gov/Payments

[Critter-3]

In lieu of estimates you can have more withheld from your regular pay ... fill in a new W-4  with the employer and enter an amount on line 4c.   Say you normally pay $1200 extra in estimates  and you are paid monthly then enter $100 on line 4c and you can stop the estimated payments.  

[Opus 17]

Just because TurboTax generates estimated payment recommendations doesn’t mean you have to follow them. If you know that you will not receive this special lump sum income in a particular year and that your regular withholding will cover your tax, you don’t need to make the estimated payments.

To avoid a penalty for the present year (whichever year that is) you can either pay 110% of the tax liability from the previous year, or pay at least 90% of your present tax liability or pay just enough in estimated taxes that you owe less than $1000 when you file.  There is no specific requirement that you must pay 110% of the previous year’s tax liability if you know your present year liability will be less, as there are the  2 other criteria to avoid a penalty.  

[fanfare]

@Opus 17 

"pay just enough in estimated taxes that you owe less than $1000 when you file. "

This is not correct,

replace the words "in estimated taxes" with "through withholding".

Estimated taxes don't count in getting you  the "owe less than 1,000" Penalty Exception.

[Opus 17]

@fanfare 

You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.

Where does it say that the $1000 threshold on the filed tax return must be met in any specific way?

[fanfare]

Please see Instructions for Form 2210 and Form 2210 Line 6.

You can get a refund and still owe an Insufficient Estimated Tax Penalty.