Estimated Tax - When do you usually make the fourth payment of the year?

[gerntz]

We don't do quarterly payments. We take one IRA distribution/yr and have the taxes withheld from that distribution.

See bottom of this:

Taxes: Estimated Tax Strategies for Retirees

 

[RunningBum]

We don't do quarterly payments. We take one IRA distribution/yr and have the taxes withheld from that distribution.

See bottom of this:

Taxes: Estimated Tax Strategies for Retirees

That link is a nice summary of the whole estimated tax payment process, as well as a good strategy for withholding if you are taking IRA distributions.

 

[sengsational]

We don't do quarterly payments. We take one IRA distribution/yr and have the taxes withheld from that distribution.

See bottom of this:

Taxes: Estimated Tax Strategies for Retirees

Good one!

I'm such a noob at this, I didn't even know about the $1000 threashold:

If you expect to owe more than $1,000 in federal income taxes that are not prepaid through withholding, you have to make quarterly estimated tax payments.

I might just employ this scheme next year:

If you want to avoid penalties for underestimated taxes and also avoid the chore of preparing quarterly estimated tax payments, have enough income taxes withheld from IRA distributions, annuities, and other payments to at least equal last year's taxes.

 

[scrabbler1]

"If you expect to owe more than $1,000 in federal income taxes that are not prepaid through withholding, you have to make quarterly estimated tax payments. "

Does this rule mean I have to make quarterly estimated IT payments of 1/4 of the entire amount I expect to owe, or just enough to get down to owing under $1,000 the following April? It seems to be the former, but I treat it as the latter (and have never been questioned by the IRA about it). For example, if I expect to owe $1,800, I have paid about $600 in the third quarter, $600 more in the 4th quarter, and $600 more in the following April. Most of my income occurs after June 1st, the start of the third "quarter" for estimated tax purposes. I have no way to have taxes withheld because none of my income is from W-2 or an IRA's RMD, both of which have withholding provisions.

In an somewhat related question, could the federal subsidy from the ACA be used as a backhanded withholding method? I have no advanced premium payment via the subsidy, so I anticipate a subsidy (tax credit) of about $900 coming my way. Could I use that $900 as partial payment of my federal income taxes which would drop my total taxes due to under $1,000. I haven't found anything on point about this (i.e. the "safe harbor" rule and estimated IT payments), but I'm going to do it anyway.

 

[Disappointed]

One more question, since State income tax is part of the itemized deductions and it will affect the accuracy of the estimated Federal tax, are we supposed to try to do the State income tax estimate first and use that number to calculate the estimated Federal tax?

mP

 

[scrabbler1]

One more question, since State income tax is part of the itemized deductions and it will affect the accuracy of the estimated Federal tax, are we supposed to try to do the State income tax estimate first and use that number to calculate the estimated Federal tax?

mP

Definitely, if you plan to itemize. And make sure to make that 4th quarter estimated state income tac payment before 12/31 so you can deduct it on that same year's federal return. Otherwise, you have to wait another year before you can deduct it. (I learned that the hard way back in 1998, the first year I made an estimated stat income tax payment.)

 

[RunningBum]

One more question, since State income tax is part of the itemized deductions and it will affect the accuracy of the estimated Federal tax, are we supposed to try to do the State income tax estimate first and use that number to calculate the estimated Federal tax?

mP

Depends when you make the state income tax payment. If you make your 1st one on April 15, it's not a first quarter deduction. If you're doing your 4th on or before Dec 31, that is a 4th quarter deduction so you can calculate it in. Except for if you make an early 4th quarter payment, usually you're deducting the state income tax paid for the previous quarter.