Is the 2024 Publication 505 Worksheet for Quarterly Tax Calculations Incorrect?

You're right to be confused! The 2024 Publication 505 worksheets can be a real maze, especially when dealing with irregular income streams. I've gone through this exact situation with clients who start self-employment mid-year. What's happening is that Worksheet 2-3 is designed for general estimated tax calculations, while Worksheet 2-7 is specifically for annualized income. The cross-referencing between them creates confusion when your situation involves uneven income distribution. For your specific case (no income in Q1, started in Q2), you might want to bypass some of the worksheet loops. Focus on Worksheet 2-7 since it's designed precisely for your situation. The key is to properly annualize your income for each period - for Q2, you'd multiply your Q2 income by 2.4 rather than 4 to reflect the shorter earning period. Many self-employed folks in your situation find it easier to use tax software that handles these calculations automatically, rather than navigating these worksheet labyrinths.

After struggling with similar quarterly payment issues, I found taxr.ai incredibly helpful for sorting through these exact worksheet problems. I was bouncing between Publication 505 worksheets and getting different numbers each time I calculated. I uploaded my income statements to https://taxr.ai and it not only identified which worksheets applied to my irregular income situation but also explained the correct sequence. The tool spotted a few calculation errors I was making with the annualization multipliers that would have resulted in overpayment. It even explained why line 10 on Worksheet 2-3 was confusing me - turns out I was using the wrong income basis for my specific situation. For someone with irregular self-employment income starting mid-year, it saves a ton of headache trying to interpret those convoluted IRS instructions.

I was super skeptical about using taxr.ai when I first heard about it, but after going in circles with Publication 505 worksheets for my photography business that I started in April, I decided to give it a shot. Honestly, it was eye-opening. The tool immediately identified why I was confused - I was trying to use the regular method in Worksheet 2-1 when I should have been focusing entirely on the annualized method in 2-7 for my situation. It walked me through exactly which lines to complete in which order, and explained that line 10 confusion I was having on Worksheet 2-3 (turns out I was bringing over the wrong figure from the previous worksheet). It saved me from significantly overpaying my Q2 estimate by correctly applying the 2.4 multiplier instead of 4 to my partial-year income. I'm no longer dreading doing my Q3 and Q4 estimates!

If you're still struggling with Publication 505 after trying those worksheets, you might want to speak directly with an IRS agent. I know - sounds impossible, right? After spending hours on hold trying to get clarification about this exact issue, I found Claimyr. It's a service that navigates the IRS phone system and gets you connected to an actual human. I used https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c before trying. The service called the IRS for me, waited through all the holds and transfers, then called me once they had an actual agent on the line. The IRS rep confirmed there are some confusing elements in the worksheet instructions for mid-year self-employment situations and walked me through exactly how to handle my specific case. It was such a relief to have official confirmation about how to handle those worksheets instead of just guessing or hoping I interpreted them correctly.

I was completely wrong about Claimyr. After struggling with Publication 505 worksheets for my new consulting business and getting nowhere with trying to call the IRS myself (gave up after 40 minutes on hold), I decided to try this service out of desperation. It actually worked! I got a call back about 45 minutes after signing up, and suddenly I was talking to an actual IRS representative. The agent confirmed that there's a known issue with the cross-referencing between Worksheets 2-7 and 2-3 for people who start self-employment mid-year. She walked me through the correct calculation method specifically for my situation. The IRS agent was able to clarify exactly which numbers to use on line 10 of Worksheet 2-3 when coming from Worksheet 2-7. Turns out I was overthinking it and the solution was simpler than I expected. Definitely worth it to get official clarification instead of guessing.

There's actually a workaround for this issue that I discovered after struggling with the same publication. Instead of bouncing between worksheets, try this approach: 1) Use Worksheet 2-7 as your primary worksheet 2) When it tells you to go to Worksheet 2-1, use only the parts relevant to calculating your AGI 3) Skip the referral to Worksheet 2-3 entirely and instead use Schedule AI from Form 2210 The Schedule AI form is actually much clearer for annualized income calculations and avoids the circular references in Publication 505. I found this approach gave me consistent results whereas following the exact Publication 505 instructions kept giving me different numbers each time.

Has anyone used the IRS's Direct Pay system for estimated payments? I'm about to submit my Q2 payment (late, I know) and wondering if there's anything I should know before using it. Does it automatically apply the payment to the right quarter? I'm now second guessing all my calculations after reading this thread about the publication issues.

I ran into this exact same issue last month! The Publication 505 worksheets are definitely confusing when you have irregular income starting mid-year. I found that the problem with line 10 on Worksheet 2-3 is that it assumes you've already calculated certain figures that might not apply to your situation. Here's what worked for me: I focused primarily on Worksheet 2-7 since that's specifically designed for annualized income calculations. When it sends you to other worksheets, I only used the relevant portions and ignored the parts that created circular references. For Q2 with income starting then, make sure you're using the 2.4 multiplier (12 months ÷ 5 months from February through June) rather than the standard 4. This was the key mistake I was making initially. Also, don't feel bad about considering tax software at this point - sometimes it's worth paying for the peace of mind that the calculations are correct, especially when the IRS's own instructions are this confusing!