Quote:
Originally Posted by Tanya  I recently received a substantial increase in my income through a bonus. My payroll withholding was not adjusted correctly to reflect my new tax rate based on the higher income in 2007 due to the bonus.
I was concerned about underpayment penalties and interest in case of not paying an estimated tax payment to pay for the extra tax on the bonus. Is it better to make a payment immediately following the bonus? Will I avoid penalties and interest and does this it make sense? |
If you use the annualized method, form 2210 (which is complicated) you may be ok. Annualized method is used for cases like yours where a disproportionate amount of income occurs in a very short time, like during one quarter of the year. A seasonal business is a good example of this. I had the same situation with a large capital gain, and the annualized method did help. Tell your preparer about it if it doesn't get brought up. Also ask him/her about safe harbor rules.
