2/5 live cash grinders — estimated tax payments: equal vs variable?
Wasn’t sure where to post this.
I’m a live 2/5 cash grinder filing as self-employed in the U.S. I just made my first estimated tax payment for 2025.
I know the IRS safe harbor rules:
• Pay at least 90% of your 2025 liability, OR
• 100% of your 2024 liability, split into quarterly payments.
My question is: is it better to just pay **equal** amounts each quarter regardless of what I make, or to try to match payments to my actual quarterly earnings using the annualized method (Form 2210 Schedule AI)?
Poker income is super swingy, so part of me thinks equal quarterly payments are safer to avoid underpayment penalties. On the other hand, variable payments might make more sense if my big wins come later in the year.
Any other pros/self-employed folks here — how do you handle your estimated taxes?
2 Replies
I was advised always do 110% of last years equally split (I thought it’s 110 not 100 for estimated payments on schedule c income) and will never have issues. You run the risk of what the irs expects not matching what you send triggering an audit I imagine if you do it the other way even if it’s correct and it’s just a headache. Honestly a 2-5 player rarely if ever has any paperwork so probably won’t have an expected income that would trigger an audit no matter what though.
Estimated payments are not withholding. This is significant because withheld taxes are considered timely.
If you can't cover you taxes with withholding, the IRA "expects" you to make equal qtrly payments (which you obviously can't do this year if you just made your first.)
Since you are going to be unequal quarterly payments (which for poker players will be teh VAST majority) you are going have to due a form 2210 in additional to your 1040-ES. Not really a big deal but is extra paperwork.
Another option the I use is cover everything via withholding. I am retired with a IRA. In Decemeber, I estimate my tax bill for the year. I then make a distribution from IRA and have 100% withheld for federal taxes (I sometimes do the same for state taxes). I make this distribution large enough to meet one of the safe harbors.
For me often the "best" safe harbor is the 110% of prior tax year liabiltiy (so 2024) this year. This is the same safe harbor as Matinee mentions BUT if your income (from all sources) exceeds $150K (or $300K MFJ), it becomes 110% instead of 100%
