Annualized Income Installment Method

Annualized Income Installment Method means:
a method used to calculate an individual taxpayer's required quarterly estimated tax payment when income is not received evenly throughout the year. The payment for each quarter is calculated using the cumulative taxable income through that quarter. The cumulative amount is annualized to estimate 1 year's worth of taxable income. The annualized tax amount is then multiplied by the applicable percentage for the quarter to calculate the tax due year-to-date, as follows: First quarter 1/1-3/31 22.5% Second quarter 1/1-5/31 45.0% Third quarter 1/1-8/31 67.5% Fourth quarter 1/1-12/31 90.0% Any prior payments made are then subtracted to arrive at the payment due for that quarter.

Description and Definition of Annualized Income Installment Method

The Annualized Income Installment Method is a method used to figure the required estimated tax payments when the taxpayer does not receive income evenly throughout the year. Under this method, the taxpayer bases each quarter's estimated tax payment on what his income would be for the entire year if he continued to earn at the rate he has so far.

Resources

See Also

Further Reading

• Annualized Income Installment Method in the West's Tax Law Dictionary
• Annualized Income Installment Method in “A Dictionary of Taxation”