Penalty with quarterly estimated tax payment

It is your choice, however the bill keeps going up while you wait and the IRS is anything but speedy these days. You do understand the system and because you had a large increase in income i the last quarter the annualized income method could be very beneficial in reducing your late payment penalties.

There is an annualized method available because you received this in the last quarter of the year.

• What is Form 2210?
• How do I add Form 2210 in TurboTax?

Generally, you can avoid the penalty if your total timely estimated payments and withholdings are greater than or equal to the lesser of:

• 90% of the total tax after credits for the current year, or
• 100% of the total tax after credits in the prior year
• See one exception below.

You can also avoid the penalty if the amount you owe is less than $1,000 as long as any estimated tax payments you made are timely.

Note: High-income taxpayers. If your adjusted gross income (line 11 of your 2023 Form 1040) is greater than $150,000 (or $75,000 if you're married and file a separate return from your spouse), you can avoid a penalty by paying at least 110% of your total tax from the prior year.

Each Period for the annualized method:

1. Period (a) includes items for January 1 through March 31.
2. Period (b) includes items for January 1 through May 31.
3. Period (c) includes items for January 1 through August 31.
4. Period (d) includes items for the entire year.

The first three periods could be calculated by your total income for the year without the IRA distribution (assumes the rest of the year was equal in income) then divide by 12 and multiply by the number of months in each period.  In the last quarter add the IRA taxable distribution.

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