What is the annualized income installment method?

Instead of paying 25% of the year's tax on each of the four dates, you annualize what you had actually earned by each date and pay the statutory percentage of the tax on that figure — 22.5% for the first period, 45% for the second, 67.5% for the third and 90% for the fourth, under IRC 6654(d)(2)(B)(ii). If a period's annualized figure produces a smaller payment than the ordinary method would, that smaller payment is what you owe.

Do I have to use the annualized method for the whole year?

No. IRC 6654(d)(2)(A) reduces a required installment only where the annualized figure is less than the ordinary one, so the calculation is made period by period. Whatever you skip in one period is recaptured by adding it to the next.

What are the annualization factors?

Four for the period ending March 31, 2.4 for the period ending May 31, 1.5 for the period ending August 31, and 1 for the period ending December 31. They are printed on Form 2210 Schedule AI at lines 2 and 5.

How do I avoid the underpayment penalty without Schedule AI?

Pay the safe harbor: 100% of the tax shown on last year's return, or 110% of it if the adjusted gross income on that return was more than $150,000. IRC 6654(d)(1)(B) and (d)(1)(C)(ii). Paying that across the year avoids the penalty whatever this year's income turns out to be.

ANNUALIZED INCOME

Annualized Income Installment Calculator

Four equal payments assume you earn the same every month. When the money arrives in one quarter and not the others, that assumption overcharges you early and undercharges you late — and the underpayment is the one that costs. This page annualizes each period separately, using the percentages in §6654(d)(2) and the factors printed on Form 2210 Schedule AI.

Prepared for the 2026 tax year.

The method is elected period by period, not for the year. §6654(d)(2)(A) reduces a payment only where the annualized figure is less than the ordinary one — and whatever you skip is recaptured in the next period.

Profit through March 31

Net profit for the year to date, not the quarter alone.

Enter your profit for the first period

Profit through May 31

Still cumulative. It can never be less than the figure above.

This period cannot be less than the one before it

Profit through August 31

This period cannot be less than the one before it

Profit through December 31

The whole year — what the ordinary method would have taxed you on from the first payment.

This period cannot be less than the one before it

Filing status

Tax you owed last year

From last year's return, line 24. It sets the safe harbor that caps what you owe — leave it at 0 to skip it.

Last year's adjusted gross income

Over $150,000 the safe harbor becomes 110% of last year's tax instead of 100%.

Enter what you had earned by each date. The page annualizes each period with the factor on Schedule AI, applies the §6654(d)(2) percentage, and shows the four payments — and what the ordinary method would have charged instead.

Total for the year under this method $0

Due April 15 — first period $0

Due June 15 — second period $0

Due September 15 — third period $0

Due January 15 — fourth period $0

The same tax in four equal parts $0

Moved out of the early periods $0

Safe harbor $0

Not sure whether you owe anything yet? The Quarterly Tax Calculator answers that with your annual profit, and this page answers the harder question — how to split it across the four dates.

Want the four dates and what happens if you miss one? The 1099 Withholding Calculator covers the due dates and the withholding you can still claim.

What if a date has already gone by unpaid? The Underpayment Penalty Calculator works out the §6654 charge on that installment — the formula and the quarterly rates from Form 2210.

Where these figures come from

Period percentages 22.5 / 45 / 67.5 / 90 — IRC §6654(d)(2)(B)(ii).
Annualization factors 4 / 2.4 / 1.5 / 1 — Form 2210 Schedule AI, lines 2 and 5.
Required annual payment, 90% of this year or 100% of last — IRC §6654(d)(1)(B).
110% above $150,000 of prior-year AGI — IRC §6654(d)(1)(C)(ii).
Recapture of a reduced payment — IRC §6654(d)(2)(A)(ii).
Figures checked 4 October 2026 against the sources above.

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