To avoid underpayment penalties due to fluctuating income,IRS Form 2210allows the taxpayer to annualize income for a particular quarter and compute the estimated tax payments based on that amount. Schedule AI of Form 2210 provides a column for each quarterly period, and the taxpayer annualizes the...
The full calculations for annualized income, when used as part of the annualized income installment method to calculate estimated taxes and avoid underpayment penalties, can be done via the worksheet on Form 2210 for federal taxes.4Taxpayers might also annualize their income for state taxes, which ...
When a taxpayer has a fluctuating income, it often causes them to underpay on one or more of the quarterly estimates leading to underpayment penalties. The annualized income installment method calculates the taxpayer's estimated tax installment payments and helps to decrease underpayment and correspondi...