Estimated taxes & last quarter payments?

[Surewhitey]

So being self-employed for the first year (coastFI is what I call it)...I didn't pay any quarterly taxes. At the end of this year I just asked DW to increase her fed taxes by $6-8k to help cover SS & Medicare and a bit of fed tax.

Are there any pitfalls I may experience by doing this?
Thanks!

Basics, made appx $60k in the 22% tax bracket... After all tax writeoffs & individual 401k (26,000), net around $24k. I'm thinking I'll still owe a bit, but I just want to show something paid to cover some of it.

 

[cathy63]

You may owe an underpayment penalty if your DW's 2020 withholding isn't enough to reach a safe harbor.

You need to have paid one of these amounts:
- 90% of the tax due for 2020
- 100% of the tax liability for 2019, unless your 2019 income was over $150K, in which case it's 110%

If your DW's withholding was enough to cover the taxes due on her own salary, and she increased it by $6K to $8K to cover your $24K income, and you're really in the 22% marginal bracket, then you're probably o.k. If you think your DW's withholding was on the low side originally, then you can make an estimated tax payment by January 15 to get you up to 90%.

 

[Surewhitey]

Good to know. I wonder if the $150k is an arbitrary #? We actually got a refund last year and, I think, it was under the $150k in 2019, so it sounds like we should be fine.

Thanks!

 

[audreyh1]

Yeah, $150K AGI was just some threshold they decided to set.

 

[Surewhitey]

Just a follow up on the outcome. DW did put in the $8k over Nov-Dec. After maxing the SEP 401K ($33k-ish), we'll be getting back $5k of the $8k. The SEP 401k saved my bacon...

 

[audreyh1]

In more ways then one!

 

[Bigdawg]

After maxing the SEP 401K ($33k-ish), we'll be getting back $5k of the $8k. The SEP 401k saved my bacon...

We didn't want to deal with quarterly payments so we increased our withholding. We both withhold married but at the higher single rate plus an additional 5-6 hundred per month. Still trying to dial in the right amount. A bit high this year. Getting a 6K federal return for 2020. Oh well. Not ideal but DW loves getting a nice tax refund. Me, not so much.