Question

Can I enter the income from a K-1 on form 2210 - Annualized method for the fourth quarter to avoid an underpayment penalty?

Forum|Forum|7 years ago
June 6, 2019
4 replies
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Can I enter the income from a K-1 on form 2210 - Annualized method for the fourth quarter to avoid an underpayment penalty since I will receive the K-1 from an SCorp for 2017 in the first few months of the following year(2018) ? I can’t make a 110% estimated payment due to the corporation not distributing tax money until the K-1 is done.

TurboTax Deluxe Windows

Hal_Al

Employee

That doesn't sound right. If the corporation doesn't distribute the money until 2018; it is 2018 income, not 2017 income.

Critter

Employee

On an S-corp the income is taxed in the year earned even if it is not distributed to the shareholders due to the pass thru nature of the beast. If you are unhappy with this arrangement then talk to the corp to get distributions more frequently or earlier.

Hal_Al

Employee

You have to make a 4th Qtr estimated payment by Jan 15, 2018.

Yes, form 2210, using the annualized method will reduce or eliminate the penalty due to a large income increase in the 4th qtr. But if you don't make a payment by Jan 15, it will only reduce, not eliminate, the penalty.

When TurboTax sees that you are subject to a penalty, the interview will ask if you want to use the annualized method.

Critter

Employee

To avoid a penalty you just have to pay ...

· Your taxes withheld don't cover at least 90% of what you owe for 2017, or

· Your taxes withheld aren't at least 100% of what you owed for your 2016 taxes, if your adjusted gross income (AGI) is up to $150,000, or

· Your withholding is 110% if your AGI is more than $150,000. (The AGI amount is $75,000 if you're married filing separately.)

So you don't need to know what your 2017 income will be ... just base the estimate on your 2016 tax liability.