If your income arrives mostly late in the year, equal quarterly estimated payments can overstate what the IRS required early on. Form 2210, Schedule AI (the annualized income installment method) lets you base each required installment on income earned through that point in the year. The penalty is figured separately for each due date. You can owe it for an early installment even if you paid enough later or are due a refund, unless Schedule AI reduces the early requirement (Instructions for Form 2210).
Regular installments vs. annualized installments
Under the regular method, the required annual payment is the smaller of 90% of current-year tax or 100% of prior-year tax. The prior-year figure becomes 110% if prior-year AGI exceeded $150,000 ($75,000 if married filing separately). Most taxpayers then divide the required annual payment into four equal installments (Instructions for Form 2210). The percentages and AGI thresholds above come from the 2025 instructions. Confirm them against the instructions for the year you are filing.
That assumes income arrives evenly. Publication 505 gives the example of a repair shop that earns far more in summer. Its required payment for one or more periods may be lower than the regular-method amount.
The annualized method looks at cumulative income from January 1 through four cutoffs. Each cutoff is scaled up to a full year, and the tax on that annualized amount is multiplied by a cumulative percentage (Form 2210):
| Installment due | Income measured through | Annualization factor | Applicable percentage |
|---|---|---|---|
| April 15 | March 31 | 4 | 22.5% |
| June 15 | May 31 | 2.4 | 45% |
| September 15 | August 31 | 1.5 | 67.5% |
| January 15 | December 31 | 1 | 90% |
These periods are cumulative, not separate quarters. The second column covers five months starting January 1, not the two months between April and May. The table lists the filing schedule for individuals. Estates and trusts use different period end dates, so check the Schedule AI instructions if that applies.
What the form calculates
For each column, Schedule AI works through these steps:
- Enter AGI for the cumulative period.
- Multiply it by the column's annualization factor.
- Compute annualized income tax after deductions.
- Add annualized self-employment tax, which has its own Part II. The instructions list a separate "Annualized Self-Employment Tax" section.
- Apply the applicable percentage to get the cumulative amount due.
- Subtract installments already required in earlier columns.
- Compare the result with the regular installment, increased by any amount saved in earlier columns. The smaller figure is the required installment.
The last step is why you cannot simply multiply the annual tax by 22.5%, 45%, 67.5%, and 90%. The IRS describes it this way: "Schedule AI selects the smaller of the annualized income installment or the regular installment (that has been increased by the amount saved by using the annualized income installment method in figuring any earlier installments)" (Instructions for Form 2210).
Annualizing can also overstate income when early months are unusually strong. The example below shows this.
Example (hypothetical)
Assumptions:
- Single filer with self-employment income.
- Cumulative income through March 31, May 31, August 31, and December 31 of $15,000, $20,000, $35,000, and $60,000.
- Annualized tax in each column (income tax plus self-employment tax) of $4,000, $6,000, $12,000, and $13,333.
- Regular installment of $3,000 (a $12,000 required annual payment divided by four).
I computed these figures with a short script that follows the simplified logic above. The tax amounts are placeholders, not a bracket computation.
| Column | Annualized income | Cumulative amount due | Less earlier installments | Regular installment plus amount saved | Required installment |
|---|---|---|---|---|---|
| (a) | $60,000 | $900 | $0 | $3,000 | $900 |
| (b) | $48,000 | $2,700 | $900 | $5,100 | $1,800 |
| (c) | $52,500 | $8,100 | $2,700 | $6,300 | $5,400 |
| (d) | $60,000 | $12,000 | $8,100 | $3,900 | $3,900 |
The four required installments total $12,000. That matches the annual requirement, but the timing is very different from $3,000 four times. Notice that annualized income falls from $60,000 to $48,000 in column (b). Strong early months can overstate the year, and the cumulative structure corrects for that.
Withholding timing
Withholding is treated as paid evenly by default. Federal income tax withheld, and excess social security or tier 1 RRTA tax, is considered paid one-fourth on each due date unless you can show otherwise (Instructions for Form 2210). Treating withholding as paid on the dates it was actually withheld requires checking box D in Part II and attaching Form 2210.
Late-year withholding can therefore cover earlier shortfalls only if you use that election. You cannot give your employer a payment to cover estimated tax or past pay periods (Publication 505). The practical options are a new Form W-4 or a higher payment before a due date.
Other timing rules matter for the penalty calculation:
- Payments are applied first to the oldest unpaid installment, even if you designate them for a later one.
- If the total tax shown on the return minus withholding is under $1,000, no penalty applies (Instructions for Form 2210).
- Using Schedule AI for one due date means using it for all four, and you check box C and file Form 2210.
What the calculator does
The Quarterly Estimated Tax Calculator works from an annual target and spreads it across installments. It does not reproduce Schedule AI, and it does not know how your income was earned across the year. For uneven income, treat its output as the regular-method baseline. Then use Schedule AI inputs, such as cumulative AGI at each cutoff, to see whether a lower early requirement is possible. The estimate depends on the facts you enter, and the tool does not file returns or make elections. For background on the penalty itself, see Estimated tax payments and underpayment risk.
The worksheet version is Worksheet 2-9 in Publication 505, and the filed version is Schedule AI in Form 2210. Use the forms and instructions for the tax year you are filing.