Entering amounts for annualized income installment method screen 8, do you calculate what the annualized amount will be or do you enter income up through the period?

[George4Tacks · Accepted solution]

This is for form 2210 for the year you are filing (e.g. 2018). It should be calculated for what really was the income for up through prior year periods. 

I often cheat just a bit, when I know one income item triggered the increase, such as capital gain. I remove the offending item (capital gain) from the total for the year. I compute 3/12, 5/12 and 8/12 of that remainder and use CTRL + E to enter that amount as "computed". I then use CTRL+E to enter "actual" amounts for income through that period. 

[LSTAX]

George, thank you for the explanation that I enter income "up to the period" for each column.  I see form 2210 then annualizes for me.  I'm intrigued by how you omit the offending item and then enter computed without the item for the three periods.  What are you doing with the actual amount? Is it one entry in the 3rd column 1/1/18 - 8/31/18 so that the actual item is weighted heavier later?  

[George4Tacks]

For example: Client sells stock in October and makes a long term profit of $100,000 on top of their regular salary of $60,000. I enter Total Income for 3 months = 15,000 and capital gain for the period as -1. Total income for 5 months = 25,000 and capital gain for the period as -1. Total income for 8 months = 40,000 and capital gain for the period as -1. That probably leaves the client only owing underpayment penalty for the 4th quarter estimate due 1/15 of the following year.
If the gain were in July, the only change to the above would be: Total income for 8 months = 140,000 and capital gain for the period as 100,000. That means penalty for 3rd and 4th quarter payments.

What is your "offending item?" i.e. what triggered the underpayment and when did it happen? I use capital gain, as that is what I saw most often. Bonus salary can be another, in which case you would need some pay stubs for the end of each quarter. I only use my cheat as way to not deal with minutia, when it does not significantly impact the difference in the actual amount. Ideally you could track down every penny, but would it make a large enough change to warrant the cost to the client compared to what the 2210 penalty is.

[LSTAX]

This particular return is for a partner in a law firm who does not receive income evenly.  Nothing in Q1, a small amount in Q2 then it jumps in the third quarter. I want to minimize penalty where I can.  This my first QBI where no credit on S/E income because they are a law firm so they are SSTB.   Since it came through the K1 I missed entering 1 for specified service trade or business on section 199A line 20.  

[LSTAX]

i have one more issue with this return - a foreign tax (will post a new question)

[George4Tacks]

This sounds like a client that you need to actually compute 1040ES quarterly for during the year. They should check in each quarter to give you their earning so you can tell them the estimate to pay.
I am sure you have recognized that Lacerte likes to have -1 in periods with zero income. or zero CG or zero SE or .....