Annualized Income: IRS Form 2210

artg

I’d like to try the Quicken Community first before I go out to the Turbotax Community. Here’s my dilemma: As we close on the end of 2019 I’m attempting to minimize my penalty for Underpayment of Estimated Tax (IRS Form 2210.)

Background: My wife and I receive pension income throughout the year on a monthly basis and have taxes withheld. Based on a non-qualified investment account, we have paid Estimated Taxes in 2019 for tax year 2019. This past week the mutual funds in our non-qualified account distributed capital gains (and the amount was unexpected.) The Tax Center under the Planning tab tells me we’re going to have a substantial tax bill in April 2020 which makes perfect sense. I know I can make another estimated payment by 15 January 2020. However, my goal is to develop a report in Quicken that would allow me to feed in the answers to Turbotax when it asks me if I want to file IRS Form 2210AI and just pay my liability on 15 April, with a penalty as small as possible.

So, has anybody in the community developed any kind of report that would capture what I’m looking for or help me? By the way, I did develop a report that captures the distributions (Dividends, LT Capital Gains and ST Capital Gains) by quarter for the non-qualified investment account.

artg

q_lurker: Thank you as well. I think you're absolutely correct that demand would be pretty small for that tool. But I wanted to ask and putting together a spreadsheet is not the worst thing to do.

Tom Young

It's not really clear that you're going to have any underpayment penalties in the first place.

Assuming that the taxes withheld and the estimated taxes paid amount to 100/110% of last year's income tax liability, (line 15 of the 2018 income tax return for most people, though there are possible adjustments), you shouldn't be subject to an underpayment penalty.  I don't know the state of the current TurboTax program, beyond the fact that it's not finished, but you might try entering your information in a summary fashion in both the 2018 program (if you installed TT on your computer) and the 2019 program to see if a penalty is assessed.

If you believe you will incur a penalty and the last pension payment hasn't yet been distributed, upping the withholding if you can is always a good option as withholding is allocated evenly throughout the year irrespective of the actual dates of withholding.

Offhand the only way I can think of for generating a report in Quicken that will annualize your income would be to actually make an entry in Quicken reversing that December distribution or distributions and then make four new entries "as if" the distribution(s) came in evenly in the four quarters.  Then run your report 4 times with "Custom Dates" that are the same as the Form 2210AI.  Finally, reverse your entries.

artg

Thanks Tom. My 2019 withholding and estimated payments do not equal line 15 of my 2018 1040. I've built a couple of quicken reports that show income, FITW and investment distributions by month which was pretty easy. I then did a little work with custom dates to match the four annualized income installment periods and transferred my answers to an Excel spreadsheet. So I think I'll have a workable solution when Turbotax does its "interview" and asks me if I want to attempt to avoid the penalty (assuming there is going to be a penalty.) Thanks again.

Tom Young

"My 2019 withholding and estimated payments do not equal line 15 of my 2018 1040"

That's a little surprising unless you opted to have TurboTax calculate the estimated tax payments based on the "90" safe harbor and blew right past that, big time.

I did neglect to mention the obvious: Pay the 4th quarter estimated tax payment on time and sufficient to get you into one or the other safe harbors, and then annualize.  Everything else being equal that should result in no penalty.

artg

Thanks again Tom. In terms of: "unless you opted to have TurboTax calculate the estimated tax payments based on the "90" safe harbor and blew right past that, big time" well the short answer is "yes." Basically, in 2018 we had a couple of mutual funds distribute capital gains that I did not expect. So, I made a VERY BAD assumption that those distributions would be a one time event. Well, guess what...they weren't a one time event and those same two funds distributed long and short term capital gains this past week and (to make matters worse) more than 3.5 times as much as what was paid out in 2018. Yes, it's a very good problem to have but we're on the hook for a hefty tax bill. And I wasn't planning on making an estimated (4th quarter) payment around Christmas time. But you're right...I may need to log into EFTPS and do what I need to do. Thanks again.

q_lurker

Just to get back to your original question, there is no canned set of reports for those quarterly estimate time periods.  

By the end of tax prep, I usually have my Quicken file close to mirroring my tax information for both income and expenses.  At that point, I can then usually run separate Tax Summary reports or customized spending/income reports for 1/1-3/31, 1/1-5/31, 1/1-8/31 to get the necessary data for the annualized computations.  (I have rarely had to do that.)  Might be nice if that sort of 'Tax-quarter' timing was available just as monthly or 'real' quarterly summaries are offered for some reports, but frankly I would expect the demand to be pretty small.  I don't see it being worth the effort.

artg

q_lurker: Thank you as well. I think you're absolutely correct that demand would be pretty small for that tool. But I wanted to ask and putting together a spreadsheet is not the worst thing to do.