J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

27.5 Adjusting Your Payments During the Year

If, during the year, your income, expenses, or exemptions change, refigure your estimated tax liability and adjust your payment schedule as shown in the following Examples. Increasing an installment payment cannot make up for an underpayment in a prior period; see Example 2 below. However, withholdings from pay, pensions, and IRA withdrawals can be allocated equally over all four periods and, thus, withholding increased at the end of the year may be applied to earlier periods.

If taxes paid in the previous installments total more than your revised estimate, you cannot obtain a refund at that time. You must wait until you file your final return showing that a refund is due.

EXAMPLES

1. Smith, who is self-employed, figures that to avoid a penalty for 2013 under the estimated tax rules discussed above, he must make estimated tax installments of $6,000. By April 15, 2013, he pays an installment of $1,500. In June, he amends his estimate, showing a tax of $3,000 instead of $6,000. He refigures the installment schedule by dividing $3,000 by 4, which gives a payment rate of $750 for each period. As he paid $1,500 in April, the $750 overpayment covers his June obligation. By September 16, 2013, he pays $750; by January 15, 2014, he pays $750.

2. In August 2013, Jones finds that his estimated 2013 tax liability should be $25,000 rather than his original estimate of $20,000. He paid $5,000 as his April and June installments ($10,000 total). ...