You need Schedule AI to compute your required installments of estimated tax if you will be using the "annualized income installment method", which lets you defer payments of estimated tax if your income fluctuates during the year.
For each column enter your total income for the period shown, minus your adjustments to income. Don't forget to deduct half of your self-employment tax for each period. You can compute the correct amount by completing Part II of Schedule AI of this form and multiplying the amount on lines 34a to 34d by 8, 4.8, 3 and 2, respectively.
If your annualized income is over $156,400 ($78,200 if married filing separately), your itemized deductions need to be reduced in accordance with the IRS instructions to take into account the phaseout of itemized deductions for high-income taxpayers.
We do this computation for you. For each column, we do the following:
Annualize your itemized deductions by multiplying the amount you entered on lines 4a to 4d by the factor on line 5.
Annualize the special types of itemized deductions you entered on lines 4Aa to 4Ad the same way.
Take the difference between these two numbers and multiply by 0.80.
Compare the result with 3% of your annualized income over the threshold ($156,400 or $78,200).
The smaller of these amounts is subtracted from your annualized itemized deductions to obtain the amount we display on the tax form.
Normally, we enter $3,400 times the number of personal exemptions to which you are entitled. However, if your annualized income in any column is over the threshold for your filing status, the IRS instructions dictate reducing the total according to a formula as follows (we do this computation for you):
Determine the excess, if any, of your annualized income over the threshold for your filing status. The thresholds are Single-$156,400; Joint/Q.W.-$234,600; Married Filing Separately-$117,300; Head of Household-$195,500.
Divide the excess by $2,500 ($1,250, if married filing separately), rounding up to the next highest whole number if the result is not a whole number.
Multiply the result by 0.02. Convert to decimal, but not over 1.00.
Multiply your total exemptions by the decimal amount.
Subtract the result from the total exemptions to get the adjusted exemption amount.
We calculate the tax using the Tax Table, Tax Rate Schedules, or Capital Gain Tax Worksheet, as appropriate. If this return is for a child under age 14, please use Form 8615 and override our computation.
If you had self-employment income, complete Part II now and enter the amounts from lines 34a to 34d. On a joint return, add together the amounts for you and your spouse.