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IRS quarterly payments

J

Joyce

TUG Member
Joined
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Location
Farmington, CT
Sold some stocks this year and because of the capital gain, and the new tax laws, I had to pay taxes. When i printed out my turbo tax copies, along came a sheet with an estimate of quarteley payments. Does that mean that in addition to the adjustment I made with my pension fund, I have to pay quarterly too? Confused!!
 
I posed this question to me very smart wife- and linked it to a small trust I pay tax on each year. IRS sends me envelopes and forms that I blow off and pay the tax annually. DW didn't have an answer for you, but she told me to check the tax return and see if I had been charged a penalty. DUH! But I think the answer you're looking for it that the quarterly payments are in lieu of paying those capital gains at one time annually. That happens when you don't have withholding and the amount is above a certain (unknown) amount.

Jim
 
Joyce said:
Sold some stocks this year and because of the capital gain, and the new tax laws, I had to pay taxes. When i printed out my turbo tax copies, along came a sheet with an estimate of quarteley payments. Does that mean that in addition to the adjustment I made with my pension fund, I have to pay quarterly too? Confused!!
Click to expand...

The primary reason for making the quarterly estimated tax payments for 2019 would be to make sure you don’t incur a penalty for an underpayment of taxes when you prepare your return for 2019.

The easiest way to avoid a penalty is to make sure your 2019 withholding is equal to or greater than your total tax liability for 2018. This is referred to as the “safe harbor test.” Your total tax liability is the total taxes before accounting for withholding and estimated tax payments, not the amount that is due with your 2018 return.

However, if your taxable income for 2019 is going to be significantly less than it was in 2018 you may be better off just making sure your withholding exceeds your tax liability. This takes some planning and estimating of course. If you can accomplish this then you won’t incur an underpayment penalty.

So, depending on your situation you may not need to make any estimated tax payments.

I hope this helps.

Best regards.

Mike
 
Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

https://www.irs.gov/taxtopics/tc306

PS: 1/4ly estimates are to make sure you have paid enough taxes during the year to avoid paying the penalty for not paying enough during the year.
 
mjm1 said:
The primary reason for making the quarterly estimated tax payments for 2019 would be to make sure you don’t incur a penalty for an underpayment of taxes when you prepare your return for 2019.

The easiest way to avoid a penalty is to make sure your 2019 withholding is equal to or greater than your total tax liability for 2018. This is referred to as the “safe harbor test.” Your total tax liability is the total taxes before accounting for withholding and estimated tax payments, not the amount that is due with your 2018 return.

However, if your taxable income for 2019 is going to be significantly less than it was in 2018 you may be better off just making sure your withholding exceeds your tax liability. This takes some planning and estimating of course. If you can accomplish this then you won’t incur an underpayment penalty.

So, depending on your situation you may not need to make any estimated tax payments.

I hope this helps.

Best regards.

Mike
Click to expand...
Hi Mike.

Thanks for your expertise.

Richard
 
I pay tax every year and my income changes a lot due to rental income and the sell of stocks. Some years I had to write a check for $6000 in addition to the amount that the Navy had already taken out of my pension. The penalty was not very much and I just paid what Turbo Tax estimated. Last year I increase my withholding with the Navy and only wrote a check for $900 this year. I also just started social security and completed form w-4v and told them to take out 22 percent for Federal Withholding. If I have to pay a penality next year, I don’t worry about it. It is too much trouble to write a check every quarter and mail it in. Also, you have to keep track of it with canceled checks. Turbo Tax always prints out those quarterly forms for me and I throw them away.
 
For years my CPA gave me stubs for quarterly payments. I never did them - once she pointed out a penalty I had to pay to the IRS because of it. It was less than $10 if I recall.

What I wish was one of my credit cards gave bonus points for pay your taxes with us! Because of the fee - I only pay by credit card if I'm in need of bulking up a points accounts for a purpose.
 
OldGuy said:
Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

https://www.irs.gov/taxtopics/tc306

PS: 1/4ly estimates are to make sure you have paid enough taxes during the year to avoid paying the penalty for not paying enough during the year.
Click to expand...

Using that actual IRS rule/explanation, when I/we were self-employed (like, forever), I just paid 1/4 of each year's tax bill each of the next four quarters.

Did I say that right?

Now I use Taxact, and I have no idea what's going on. I'm pretty sure they don't either.
 
Every year I withhold enough and get a refund and every year turbo tax prints out quarterly payments. I do not get them from the IRS so I ignore them. I have extra withholding taken from our RMD every December.
 
Due to the death of my MIL in 2016, we had a spike in income for 2017. We owed more that $1000, and had to pay a penalty - $14 if I remember correctly. I don't remember the exact wording, but I was under the impression that we had to pay quarterly taxes for 2018, so I did. I knew it was ridiculous, but paid them anyway. Bottom line is that we are getting a large refund this year, and the IRS has already sent us the payment stubs for 2019. I have decided to ignore them this year...
 
mjm1 gave an excellent answer as to why and how much one should pay in quarterly payments. TUGBrian gave the best answer as to the easiest way to pay.

As far as Quicken goes, they tend to estimate (slightly overestimate in my mind) as to how much you should pay quarterly based upon your tax situation for the current year that you are filing. If there are substantial changes in your tax situation for the next year (for example, not expecting as big a hit on capital gains), the Quicken estimate can be way off. I tend to look at what I owed beyond what was automatically deducted for the current year and then do quarterly payments that would leave me slightly short of what I would have owed. In the end, I don't get a tax refund the next year, but I am also not loaning the government money without gaining any interest.
 
We have used the method of making sure we had enough withheld to pay last year's taxes to avoid penalties in the past. The only caveat is to make sure you have the cash to pay off the bill come april.
 
The IRS, and many other things, tend to be designed for "regular" people with "regular" income, not the rest of us.
 
The US tax system is PAYGO, you are obligated to pay tax as you go (earn income). Its not a problem if you are a W-2 employee, your employer is withholding it automatically.

It gets trickier if you are a 1099 contract employee, are withdrawing from retirement accounts, or earning large dividends or capital gains in a brokerage account.

I’ve heard the IRS is suspending the late payment fee (owe more than $1000) this year because of the confusion with the new tax act.

Some States are more agressive, CA imposes a fee if you owe more than $500.

I was a 1099 contractor for a while making estimated payments, I skipped the first quarter and caught up later. CA charged me a late fee for the skipped payment -$3.


Sent from my iPad using Tapatalk Pro
 
Every year I end up owing the IRS and just pay what I owe when filing my return. The amount I owe varies from year to year. One year it may be $2,500 and another $8,500. Only once over a 20-25 year span have I been sent a bill for a penalty and it wasn't all that much. If I am OP, I just ignore the whole quarterly payment thing...

George
 
TurboTax generates those because it assumes that this year is going to be like last year. So if those cap gains were a one-time thing, ignore it. OTOH, if you're going to have some this year, and the amount is higher, you might pre-pay a little.
 
Dh and I have nothing withheld from our Social Security and my pension. Instead of paying quarterlies, a few years ago we started paying once, at the end of the year out of dh's IRA.
 
Joyce said:
Thanks everyone for your input. I was really worried and now I feel much better.
Click to expand...

Estimated Tax forms are a standard printout for TurboTax. Just make sure you have 90% of your tax liability paid (or tax liability is smaller than prior year - for the most part).


Sent from my iPhone using Tapatalk
 
12% from SS, 10% from monthly IRA (part of RMD) and at the of the year, whatever percentage from the final withdrawal from IRA to make up the rest of RMD that would meet our estimated taxes for the year. When my annuities start, it will be 10% for its monthly payment too.
 
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