Poll: Estimated Taxes

[audreyh1]

Quote:

Originally Posted by athena53 No idea. I just looked up the form and the $50 was on Line 79, "Estimated Tax Penalty". I skimmed the IRS instructions and you're right- from what I could tell, if I had no tax liability in 2015 there should be no penalty for not making estimated payments for 2016. I'll need to look at it more closely (nearly every section on estimated payments has tougher standards for higher-income households) but TurboTax may have gotten it wrong.

Are you using TurboTax? Sometimes I've had to open Form 2210 to get them to do all the calculations.

[kaneohe]

Quote:

Originally Posted by audreyh1 Are you using TurboTax? Sometimes I've had to open Form 2210 to get them to do all the calculations.

......or perhaps switched software so there may not have been carryover of previous history?

[sengsational]

I selected "some other method". The only significant taxable income I have is when I pull from 401k or IRA. My 401k custodian requires 20% federal withholding, so I don't need to do estimated taxes. If 20% wasn't obviously "too high", I might do a pro-forma return and just tell the custodian what percent withholding I'd like.

[Lsbcal]

I just overpay the Fed by a few hundred. Then roll the refund into the next year's payment. Trying to keep it as simple as possible.

When RMD's kick in I'll have to start paying some state taxes.

[jebmke]

I normally pay the safe harbor amount unless I expect my income to drop a lot; I setup the first three quarters on EFTPS and then true up 4th quarter after I do a pro-forma return in December.

[Walt34]

I pay only state estimated taxes, not federal. The pension plan will do withholding on federal but not state since we moved to WV, which is reasonable, since it isn't realistic to expect them to calculate tax rates for the other 49 states.

The state of WV helpfully sends a form about a month before they're due so I just write a check. I use TT to calculate the amount and I've found it accurate.

[Blue Collar Guy]

so i had my taxes prepared . i owe every year so i file late, i owe 12000 ish to the feds and 7000 ish to new york city and state, the tax guy says hey u have a 300 penalty to new york and 244 federal tax penalty, u need to send in quarterly payments,ok so i leave with 10 envelopes, 4 for ny state 4 for the feds and 1 each for the due taxes, i look over last years taxes, turns out the news was worse, i owed 18k to the feds and 9700 to the state, the penalty was almost 900, better late than never, next year the penalty should be lower if any, the money was just sitting in the check book not earning anything so this is found money, the cause was from all the interest dividends and capital gains on the mutual funds, i remember him telling me this last year, but i was so upset i had to write 2 checks for over 28,000 for taxes, i dismissed this penalty thing, didnt know it was so high,

[Lsbcal]

Quote:

Originally Posted by Blue Collar Guy so i had my taxes prepared . i owe every year so i file late, i owe 12000 ish to the feds and 7000 ish to new york city and state, the tax guy says hey u have a 300 penalty to new york and 244 federal tax penalty, u need to send in quarterly payments,ok so i leave with 10 envelopes, 4 for ny state 4 for the feds and 1 each for the due taxes, i look over last years taxes, turns out the news was worse, i owed 18k to the feds and 9700 to the state, the penalty was almost 900, better late than never, next year the penalty should be lower if any, the money was just sitting in the check book not earning anything so this is found money, the cause was from all the interest dividends and capital gains on the mutual funds, i remember him telling me this last year, but i was so upset i had to write 2 checks for over 28,000 for taxes, i dismissed this penalty thing, didnt know it was so high,

At today's interest rates it is better to just overpay taxes and get a refund. Unless you have stock investments that you are sure are going to outperform the penalty amount, but that is an uncertain thing as nobody can be sure about returns.

If you are apt to forget the estimated taxes, maybe bump up your withholding a lot?

[Blue Collar Guy]

i have the remaining 6 envelopes in my checkbook with a rubber band, the bride (who is the brains of the operation) put a note on the calendar and set a reminder on her cell reminder calendar, and i agree with you ill over pay and take the refund no more major penalties for us

[copyright1997reloaded]

When I retired, I started doing estimated...but sometimes forgot when it came to the quarter dates.

Since I also get a pension, I solved the issue by increasing the withholding on it until I stopped owing at tax time (or more importantly didn't have to pay a penalty).

[CardsFan]

This will be my first year with no W-2 income (and there is no pension, or SS right now). Last year I had some W-2 income in Jan/Feb, and then had withholding taken from my IRA distribution, which covered more than I owed. This included a chunk of cash for 2017.

I will probably take another distribution later in the year, with some withholding to cover it and an anticipated tIRA/RothIRA conversion.

Question for you experienced folks: I also have some interest and dividends coming in from the after tax account, throughout the year. Do I risk being assessed a penalty since I will only be paying later in the year, through the withholding, even though some small part of my income is earlier in the year?

FYI, for the poll I voted "some other method:.

[kaneohe]

Quote:

Originally Posted by CardsFan ................................... I will probably take another distribution later in the year, with some withholding to cover it and an anticipated tIRA/RothIRA conversion. ............................ I also have some interest and dividends coming in from the after tax account, throughout the year. Do I risk being assessed a penalty since I will only be paying later in the year, through the withholding, even though some small part of my income is earlier in the year? ..................................

Provided you withhold "enough" , there should be no problem with paying later in the year. Withholding is more equal than estimated taxes.......timing matters for the estimated taxes but not for withholding (provided, of course, it is withheld in the correct yr) . Withholding is considered as being paid evenly throughout the year as is your income (unless you want to declare as lumpy).

[CardsFan]

Thanks, I was hoping that was the case.

[gerntz]

I calculate what I think our taxes will be based on income & pay them in Dec as part of the annual IRA withdrawal. It's technically same as earned income withholding.

[pb4uski]

I use the annualized income installment method typically would owe no tax were it not for Roth conversions that I do each December and make an estimated payment in January. I use EFTPS to make the payment.

[scrabbler1]

Quote:

Originally Posted by copyright1997reloaded When I retired, I started doing estimated...but sometimes forgot when it came to the quarter dates. Since I also get a pension, I solved the issue by increasing the withholding on it until I stopped owing at tax time (or more importantly didn't have to pay a penalty).

And remember that each "quarter" is not necessarily 3 months or coincide with calendar quarters (3/31, 6/30, 9/30, and 12/31). Instead, the estimated tax quarters end 3/31, 5/31, 8/31, and 12/31, so the number of months are not 3-3-3-3 but 3-2-3-4.

This unevenness is partly the cause of why I make only 1 estimated tax payment in the 4th quarter. Besides my monthly dividend income being slightly skewed toward the end of the year, my quarterly dividends pay in months 4, 7, 10, and 12, so 2 of those payments occur in the 4th tax quarter. Then my big year-end cap gains distributions fall in that already skewed 4th tax quarter. All of this taken together results in nearly 40% of my income in that 4th tax quarter.

[donheff]

I use withholding from my pension to cover all taxes, Federal and State, including DW's self employment tax which would otherwise require quarterlies. I basically use the previous tax years actual plus anything unusual that I anticipate. E.G. I applied a refund from last year (due to high medical) to this year because I anticipated a substantial CG from a second house sale.

[audreyh1]

I have the estimated tax payment due dates on my computer calendar, and I get reminders 5 days in advance.

This year I finally got brave enough to link my EFTPS account to one of my savings accounts where I set aside funds I know will be going to taxes. So I set up automatic scheduled payments for the whole year. Don't have to worry about it until next year.

[W2R]

Quote:

Originally Posted by audreyh1 I have the estimated tax payment due dates on my computer calendar, and I get reminders 5 days in advance. This year I finally got brave enough to link my EFTPS account to one of my savings accounts where I set aside funds I know will be going to taxes. So I set up automatic scheduled payments for the whole year. Don't have to worry about it until next year.

I love the way that EFTPS just takes care of that. I do check my bank account on the due date to make sure it takes the money each time, but so far so good. I have my Louisiana estimated taxes set up for automatic scheduled payments the same way.

I am so glad that you posted a number of times about EFTPS, because your posts encouraged me to finally look into it. IMO, it's one of those electronic services that actually does work just as one might wish.

[Gotadimple]

Quote:

Originally Posted by audreyh1 I have the estimated tax payment due dates on my computer calendar, and I get reminders 5 days in advance. This year I finally got brave enough to link my EFTPS account to one of my savings accounts where I set aside funds I know will be going to taxes. So I set up automatic scheduled payments for the whole year. Don't have to worry about it until next year.

Attagirl! Now if you use a checkbook program (i.e. Quicken, MoneyDance), set up a reminder to automatically post the payment in the register.

- Rita