form 2210 schedule AI, NIIT

[user17705283360]

I'm using the desktop version of TurboTax Deluxe, married filling jointly.  The annualized income for the 2nd annualize period (form 2210 schedule AI line 3b) is over $250,000.  The annualized income for the other 3 periods is less than $250,000.  Do owe NIIT (Net Investment Income Tax) for this during the 2nd period?  TurboTax isn't automatically adding it to the tax due on form 2210 schedule AI line 14b.  I can manually enter it on form 2210 schedule AI line 16b, but then TurboTax says there is an error and says "Line 16 should be blank."

Does this mean I don't owe NIIT for the for the 2nd period even though the annualized income exceeded $250,000 for that period?  If I do owe NIIT (for just the 2nd period), what is the proper method getting it added when using the annualized method?

[dmertz]

"The annualized income for the 2nd annualize period (form 2210 schedule AI line 3b) is over $250,000.  The annualized income for the other 3 periods is less than $250,000."

If you are referring to gross income, you are determining the income per period incorrectly.  Each of the four periods begins on January 1, so each subsequent period includes the income shown for  the previous period.  This means the income for each subsequent period has to be at least as much as the previous period.  In other words, each period shows gross year-to-date income, where the date is the ending date of the period.

The only way that you could have NIIT apply to period (b) and not to periods (c) and (d) is if you had substantial deductions added in periods (c) and (d) that are less that the income added for those periods.

[baldietax]

I was looking at this and the 2210 instructions don't specify anything about how to handle NIIT variations other than the comment on the form about including NIIT here.  I see what you are saying - TT doesn't do the NIIT calculation automatically by quarter, but allows Line 16 to be adjusted if there was a value for the year as tho you are apportioning the year-end amount over the quarters like income; however doesn't handle a case where you are under NIIT for the year but jump above it for interim quarters (assuming it needs to be handled - maybe either NIIT applies to the entire year or it doesn't).

@dmertz @Mike9241 @DoninGA @VolvoGirl any thoughts?

[baldietax]

ok @dmertz is here 🙂

[user17705283360]

I'm not talking about the gross income (AGI for each period is on form 2210, schedule AI line 1 (columns a, b, c and d) and increases for each later period as you expect / describe.  I'm talking about the annualized income which is on form 2210, schedule AI line 3 (columns a, b, c and d) which is obtained by multiplying line 1 columns by the multiplier value in line 2 columns.  Since the multiplier is larger for earlier periods, the annualized income for an earlier period can be significantly larger than a later period.  I'm still trying to find the answer to the original question. 

[dmertz]

Oh, I understand your question now.  The IRS instructions for line 16 of Schedule AI say to incomed other taxes owed because of events that occurred during the months shown on the column heading.  Include the same taxes used to figure Form 2210, Part I, line 2 (except self-employment tax), plus the tax from Form 4972, Tax on Lump-Sum Distributions; Form 8814, Parents’ Election To Report Child’s Interest and Dividends; and any alternative minimum tax (AMT).

It seems that the annualizations on Schedule AI are done under the assumption that your income, deductions and credits will accrue at the same average rate for the remainder of the year beyond the period for which the calculation is being done.  With that assumption in mind, my guess is that you would need to annualize the investment income received through the end of the particular period by multiplying by 4, 2.4, and 1.5, calculate the NIIT based on that amount of annualized investment income, then include the resulting NIIT on line 16 of Schedule AI.  This would be similar to the way that self-employment tax is done, again under the assumption that income will continue to be received at the same average rate for the rest of the year.  It's certainly possible that that would result in Q2 being subject to NIIT while other periods are not, particularly if you received the bulk of your investment income in Q2.