Q3 Estimated Taxes Due Today

[mrfeh]

My experience of filing estimated taxes since 1996 is that the quarterly deadlines are [unofficially] flexible.
I have paid as much as 25 days late and have never heard from them.
However, my checks are way smaller than $100M.
I have also paid early and never received a "thank you for paying us early".

+1

In my experience, this "deadline" is not firm.

 

[audreyh1]

IRS does not know when specific estimated tax is due. Their default assumption is that income is received evenly throughout the yr and so they expect taxes to be paid accordingly. If you do not pay that way, it is your responsibility to show that your taxes matched or exceeded your tax obligation vs time via Sch AI of F2210. Even if you have a tax program helping you do the calculations, determining how the cash flowed in vs time is an interesting exercise. If you itemize deductions, you need to do the same exercise.

Actually you don't have to do this. You can just let IRS calculate the penalty for non-even tax payments. Sometimes it may even feel worthwhile not to go thru the calculations involved.

It’s easy for me to determine my year-to-date income every month via Quicken which tracks dividends, interest, etc. So as soon as I’ve gotten the month end statements and reconciled them in Quicken, generating a YTD income report is a mouse click, and it’s organized by income type.

 

[kaneohe]

My experience of filing estimated taxes since 1996 is that the quarterly deadlines are [unofficially] flexible.
I have paid as much as 25 days late and have never heard from them.
However, my checks are way smaller than $100M.
I have also paid early and never received a "thank you for paying us early".

I know someone who never paid estimated taxes.......just settled everything in April when tax return was filed. When I suggested paying the quarterly estimated taxes, he refused............."been doing it for a million yrs and nothing happened". Maybe there's bigger fish in the sea.............but ymmv.

 

[mrfeh]

I know someone who never paid estimated taxes.......just settled everything in April when tax return was filed. When I suggested paying the quarterly estimated taxes, he refused............."been doing it for a million yrs and nothing happened". Maybe there's bigger fish in the sea.............but ymmv.

I used to have my employer withhold extra from each paycheck to cover non-wages income. Got tired of estimating and potentially being way off, so I went to quarterly tax payments which reflect actual income.

 

[Cobra9777]

Paid mine last Thursday using IRS Direct Pay. I just set up an account with EFTPS, so in the future I can schedule these payments ahead of time. I've been meaning to do that for a while. Now waiting on a PIN via snail mail.

I do an estimated tax return in Excel every April after I file the prior year return. I then find the minimal safe harbor amount and pay it every quarter. In December, I usually put everything into the new TurboTax and firm things up, especially year-end dividends and CG distributions. That's also typically when I do my Roth conversion, HSA contribution, tax loss harvesting (if any), etc.

Works well for me. When one of us turns 59.5, I might look into the method described by pb4uski in post #5, but I'll need to weigh that against maximizing Roth conversions, which is still a priority for us.

 

[Sunset]

I just pay whatever the previous year tax amount + 10% divided by 4 ea. quarter.
It's safe harbor.
Interest rates are too low to worry about maximizing the money, when I can maximize my effort (no effort).
I don't fill out any form, just go online and do the payment.

 

[RetireBy90]

I just pay whatever the previous year tax amount + 10% divided by 4 ea. quarter.
It's safe harbor.
Interest rates are too low to worry about maximizing the money, when I can maximize my effort (no effort).
I don't fill out any form, just go online and do the payment.

So I'm just starting to convert to Roth. I'm planning on doing conversions to produce taxable income about $188K. If my pension and SS withholding is constant, then each quarter I should be able to pay
(((188,000-168,400)*.24)+28,765)-already withheld
Does this sound correct ?


Thanks
Edit equation should be 188,000-168400=19,600 (188K is income, 168 is 22% bracket)
and 19,600*.24=4,700
plus 22% tax of 28765 = 33,469
Figure already withheld say 10,000 = 23,469/4 = 5,868 each quarter

Thanks

Thanks again !!

 

[Sunset]

So I'm just starting to convert to Roth. I'm planning on doing conversions to produce taxable income about $188K. If my pension and SS withholding is constant, then each quarter I should be able to pay
(((188,000-168,400)*.24)+28,765)-already withheld
Does this sound correct ?


Thanks
Edit equation should be 188,000-168400=19,600 (188K is income, 168 is 22% bracket)
and 19,600*.24=4,700
plus 22% tax of 28765 = 33,469
Figure already withheld say 10,000 = 23,469/4 = 5,868 each quarter

Thanks

Thanks again !!

I should have been more clear in my post.

I take what I paid last year in taxes (total fed taxes) add 10% of that value and pay that over the year in 1/4 amounts.

Note, safe harbor applies even if your income ramps up by conversions.

Example:
Pretend last year I paid 11,000 in Fed taxes as I had $111K income.
This year I do conversions so my income will be $190K.
Safe harbor is: $11K + (10% of 11K)
= $11K + 1.1K
= $12,100

When I do my taxes the final tax amount due would be more like $25,000
So $25,000 - $12,100 = $12,900 due with my return.
So I write a check and mail off my return, but have no penalties due to the safe harbor rules.

 

[RetireBy90]

Got it - thanks

 

[audreyh1]

I just pay whatever the previous year tax amount + 10% divided by 4 ea. quarter.
It's safe harbor.
Interest rates are too low to worry about maximizing the money, when I can maximize my effort (no effort).
I don't fill out any form, just go online and do the payment.

This works fine if taxable income varies little year to year. But I have some years with substantially higher income, and I don’t want to over pay estimated taxes the following year, so I switch to the annualized income method especially as most of my taxable income is received in December. After a lower income year I do the simpler even quarterly based on prior year’s taxes method.

 

[swakyaby]

If you inherited an IRA from your mother and she had begun taking RMDs, then next year you can withhold your estimated taxes from the RMD you will receive, even if you are < 59.5 years old.

 

[Montecfo]

+1

In my experience, this "deadline" is not firm.

Well, it is in fact firm. Your penalty will accrue from the due date.

Of course IRS has no idea if you owe estimated taxes, and does not notify you if an estimated tax paymnent is late.

 

[Senator]

I have already given the government a signed check to be written out for any amount, up to and including my life, so I do not feel I should have to pay any more.

In spite of that statement, I did send my remittance via CC and 1.87% fee, which I get back 2% (tax free).

 

[scrabbler1]

Unless I get a large cap gain distribution before the end of the year, I don't make any estimated tax payments until the 4th quarter, when my income picture has become clear.


Form 2210 is pretty useless for me because it can change between the time I begin completing it earlier in the year and at the end of the year. The main item which has the biggest effect is Line 3, the premium (ACA) tax credit, and Line 4, the net amount due after the premium (ACA) tax credit. I don't know if I am going over the cliff until the 4th quarter, so at the beginning of the year Line 4 is less than $1,000 (STOP!), and I don't have to even file Form 2210. But if I update the form near the end of the year, I would have to file it. So, I don't file it.


When my tax picture becomes clear at the end of the year, and my total tax bill, net of any ACA subsidies, is greater than $1,000, I pay about half of it in January and half of it in April. The January payment I pay using the IRS's website.


On the state side, before the federal tax law change, some years I would pay it in late December so I could deduct it on the same year's federal return. Otherwise, I would try to "bunch" these end-of-year estimated tax payments into the same calendar year to save some money in taxes. It saved me a few hundred dollars several years ago. My days of itemizing deductions are very likely over, so the "bunching" tactic goes into the trash.

 

[audreyh1]

Form 2210 is pretty useless for me because it can change between the time I begin completing it earlier in the year and at the end of the year. The main item which has the biggest effect is Line 3, the premium (ACA) tax credit, and Line 4, the net amount due after the premium (ACA) tax credit. I don't know if I am going over the cliff until the 4th quarter, so at the beginning of the year Line 4 is less than $1,000 (STOP!), and I don't have to even file Form 2210. But if I update the form near the end of the year, I would have to file it. So, I don't file it.

Form 2210 isn’t normally filled out until after the tax year has completed anyway.

 

[ncbill]

Haven't got last year's taxes back from my preparer yet...hopefully they won't hand me them in October with a 3rd quarter estimated envelope filled out.

 

[RockyMtn]

In early December I sketch out my tax return for the year in Excel and I update it occasionally during the month... in late December I'll do a tIRA distribution to pay my estimated tax for 2019.... since it is a withholding the IRS and the state count it as having been made evenly throughout the year so I don't have to worry about underpayment penalties or do that pesky Form 2210 Schedule AI.

P.S. Doesn't work for those under 59 1/2 unless you don't mind the 10% early withdrawal penalty.

Now that I am 60 I'm going to start doing it this way as well. Only have to figure out the amount once and it's late enough in the year (December) that i'll have enough info to be pretty precise.

I agree that form 2210 is a major pain in the rear.

 

[lemming]

Haven't got last year's taxes back from my preparer yet...hopefully they won't hand me them in October with a 3rd quarter estimated envelope filled out.

What did you do for the first and second quarters?

 

[scrabbler1]

Form 2210 isn’t normally filled out until after the tax year has completed anyway.

Right. But if I were ever to be questioned about being late on estimated taxes for earlier quarters, I could never use Schedule A1 to show that I didn't (because it would show that I did). I'd be in a Catch-22 because I can't go back and pay estimated taxes for the prior quarters when it was the unexpectedly large (cap gains) income at the end of the year which eliminated the ACA subsidy for the entire year; and put me into the situation that I "should have" paid those taxes earlier in the year.

 

[kaneohe]

Right. But if I were ever to be questioned about being late on estimated taxes for earlier quarters, I could never use Schedule A1 to show that I didn't (because it would show that I did). I'd be in a Catch-22 because I can't go back and pay estimated taxes for the prior quarters when it was the unexpectedly large (cap gains) income at the end of the year which eliminated the ACA subsidy for the entire year; and put me into the situation that I "should have" paid those taxes earlier in the year.

I would have guessed that loss of the ACA subsidy due to large Q4 income would be reflected in the Sch AI in a similar manner to large late income alone and that the earlier quarters would not be affected so you would not necessarily owe more tax in the earlier quarters.

 

[pb4uski]

+1 That is the whole essence of 2210 AI.

 

[RetireBy90]

In a slightly related story, WSJ reported that due to several factors the FED had to inject cash into the monetary system yesterday system yesterday. Several factors contributed to shortage in cash such as draw down of the FEDs balance sheet over past 5 years, Monday's estimated tax payments, US Treasury auctions on Monday. Short term rates were as high as 5% Tuesday morning.

Only related because several of the folks on this board wrote that check for somewhere less than $100M on Monday

 

[scrabbler1]

I would have guessed that loss of the ACA subsidy due to large Q4 income would be reflected in the Sch AI in a similar manner to large late income alone and that the earlier quarters would not be affected so you would not necessarily owe more tax in the earlier quarters.

I filled out Sch AI for myself a few years ago after large, late-year income had me owing taxes. While most of the estimated taxes due were in the 4th quarter, it still had me owing a few hundred dollars for each of the first 3 quarters. But before that large, late-year income came in, I would have stopped completing Form 2210 at Line 4 because I would have owed zero in estimated taxes. Sch AI is a retrospective look at estimated taxes which should have been paid in prior quarters even though it requires some guesswork at the start of the year to see if any estimated taxes are even owed later on throughout the year. That's the problem.

 

[mrfeh]

Well, it is in fact firm. Your penalty will accrue from the due date.

Of course IRS has no idea if you owe estimated taxes, and does not notify you if an estimated tax paymnent is late.

I've paid them in the past after the due date and have never been fined.

 

[kaneohe]

I filled out Sch AI for myself a few years ago after large, late-year income had me owing taxes. While most of the estimated taxes due were in the 4th quarter, it still had me owing a few hundred dollars for each of the first 3 quarters. But before that large, late-year income came in, I would have stopped completing Form 2210 at Line 4 because I would have owed zero in estimated taxes. Sch AI is a retrospective look at estimated taxes which should have been paid in prior quarters even though it requires some guesswork at the start of the year to see if any estimated taxes are even owed later on throughout the year. That's the problem.

I can understand stopping at line 4 and not filling Sch AI at beginning of yr if you didn't expect that large late-yr income. What I don't understand is how you had tax owed in Q1/Q2 if you didn't have enough income in those quarters to have any tax owed for yr. based only on those early quarterly income flows.
(and annualized)
I wasn't under the impression that a Q4 income spike can cause estimated taxes to appear in earlier quarters.