2023 Estimated Taxes

[meleana]

Amen! That's what we do.

After reading lots of posts on here, I thought I was the only ER taxpayer who did not make quarterly payments.

The fine seems low and certainly makes things easier to just pay up once a year and forget about it.

Let's say I owe $5,000. The penalty is like 5%, right? So that is a $250 penalty? And I made a few dollars of that in my Dominion Energy 4.25% savings account in the meantime.

Please educate me on why I should fumble around with quarterly payments to Caesar?

My son will probably owe a penalty for 2022. He’s 34 and he works 2 jobs- the one that puts him over is bartending so his income varies. He owed $2000 for 2021. It seemed like such a hassle to do estimated taxes, and considering he never knows how his income will pan out.

How will he know what the penalty is and how will he pay it? You said you write one check? What do you mean? He uses the Tax Act program to do his taxes.

This is all new to us.

 

[RetMD21]

My first try at quarterly estimated payments was in 2021 and I messed up. Still the penalty was only 0.2% of the tax. I like EFTPS and like getting the confirmation right away.

 

[rrs26ja]

ncbill,


I do the same, I do a Roth Conversion usually in Dec or Jan, I then send it an estimated taxes for both IRS and NYS. I have never had an issue.

 

[HarveyS]

My son will probably owe a penalty for 2022. He’s 34 and he works 2 jobs- the one that puts him over is bartending so his income varies. He owed $2000 for 2021. It seemed like such a hassle to do estimated taxes, and considering he never knows how his income will pan out.



How will he know what the penalty is and how will he pay it? You said you write one check? What do you mean? He uses the Tax Act program to do his taxes.



This is all new to us.

He’s 34. Let him figure it out.

 

[2retireearly]

Despite my accountant's hair pulling, I don’t pay quarterlies. Couldn’t be bothered. I pay the fine, write one check. "Leave me alone! See you in April".

(and get off my lawn)

80% of my income is from my IRA and I pay the taxes at time of withdrawal anyway. So the penalty on what is left is worth avoiding the hassle of having to worry about it.

I do that also. I pay taxes monthly, on pensions and IRA, and then my estimated tax penalty is tiny. I'm fine paying that, vs doing estimated taxes. I'm kind of new to this, to I don't even understand the need to estimate my taxes, if my monthly benefits to me, are net of taxes.

 

[Gumby]

Surprised on the property tax this time of year. Many authorities send bills in summer to avoid coinciding with the IRS tax time.

Our property tax bill comes once a year, in June, and is paid in two installments - one in July and one in January. They don't send a reminder for the second payment. You have to keep track of it yourself.

As far as estimated income tax payments, I did that this past year for the first time. It was no problem. I also did a special tIRA distribution and had it all withheld (actually 99%; couldn't do 100%). I think I'll just repeat the tIRA withholding at the end this year to get me within $1000 of the tax due and skip the estimated payments.

 

[kgtest]

A lot of us use the EFTPS Electronic Federal Tax Payment System - super easy to schedule payments.

Yeah this is how I pay my quarterly tax. 4 equal payments based on what I paid total in the prior year. So if I had 40,000 in total tax due in 2022, I just login to EFTPS online on Jan 15th, make my final Q4 estimated payment ($10k for Q4-2022 ) then April 18th of this year, I will login to EFTPS online and make my first Q1 2023 payment. I think there is a dropdown to select Estimated Taxes... but you need to setup the account on EFTPS beforehand.

Super easy!

 

[audreyh1]

Yeah this is how I pay my quarterly tax. 4 equal payments based on what I paid total in the prior year. So if I had 40,000 in total tax due in 2022, I just login to EFTPS online on Jan 15th, make my final Q4 estimated payment ($10k for Q4-2022 ) then April 18th of this year, I will login to EFTPS online and make my first Q1 2023 payment. I think there is a dropdown to select Estimated Taxes... but you need to setup the account on EFTPS beforehand.

Super easy!

You might as well go the next step before April 18 (once you’ve filed your 2022 taxes) and schedule all 4 estimated tax payment for 2023 the same time that you schedule payment of any remaining tax owed for 2022. So one login for all.

This to me is a great feature of EFTPS - being able to schedule all estimated tax payments in advance if you choose the equal payment method.

 

[kgtest]

You might as well go the next step before April 18 (once you’ve filed your 2022 taxes) and schedule all 4 estimated tax payment for 2023 the same time that you schedule payment of any remaining tax owed for 2022. So one login for all.

This to me is a great feature of EFTPS - being able to schedule all estimated tax payments in advance if you choose the equal payment method.

Excellent point! Makes it sting a little less not having to login all 4 times. The money still comes out of the ol checking account though so no way to eliminate that sting lol. Taxes and death, the only 2 things certain in life.

 

[Lienlord]

I like the idea of paying the safe harbor amount in 4 equal installments. The problem is I have to file extension due to waiting for K1 forms. This means I don't end up filing until September to know how much the safe harbor amount will be. Any suggestions?

 

[audreyh1]

I like the idea of using the safe harbor amount in 4 equal installments. The problem is I have to file extension due to waiting for K1 forms. This means I don't end up filing until September to know how much the safe harbor amount will be. Any suggestions?

Yeah, you are kind of stuck there until after you file your prior year taxes.

I have years where following the 4 equal payments would have me overpaying taxes. In those years I revert to the annualized income method which is far more complex but you don’t have to worry about penalty although you do have to file form 20210.

For 2022 I ended up canceling my 4th scheduled estimated tax payment because I had already gone over my actual taxes due in 2022. Investment income had dropped substantially. These kind of things can’t be predicted.

 

[FlaMariner]

My son will probably owe a penalty for 2022. He’s 34 and he works 2 jobs- the one that puts him over is bartending so his income varies. He owed $2000 for 2021. It seemed like such a hassle to do estimated taxes, and considering he never knows how his income will pan out.

How will he know what the penalty is and how will he pay it? You said you write one check? What do you mean? He uses the Tax Act program to do his taxes.

This is all new to us.

I use Turbotax and it calculates the underpayment penalty. If there is a penalty....and sometimes there is and sometimes not.....I pay up on 4/15 along with whatever else Casear demands.

 

[Bigdawg]

I like the idea of paying the safe harbor amount in 4 equal installments. The problem is I have to file extension due to waiting for K1 forms. This means I don't end up filing until September to know how much the safe harbor amount will be. Any suggestions?

Had so many problems with K1's that my tax accountant fired me as a client. I have since got rid of all investments that had K1's. I use turbotax and do my own taxes now. I also have taxes taken out monthly from my pension checks so no AMT for me.

 

[Bigdawg]

My son will probably owe a penalty for 2022. He’s 34 and he works 2 jobs- the one that puts him over is bartending so his income varies. He owed $2000 for 2021. It seemed like such a hassle to do estimated taxes, and considering he never knows how his income will pan out.

Please. This year I have 2 W-2's and 4 1099's. I tended bar for many years. Unless you get some kind of crazy Christmas bonus the last week of December, you should know (within a few dollars) by 15-20 December what your yearly total is. I'm assuming his non bartending job is w-2. If that is the case, tell him to have a % or 2 more w/held (taxes) on that w-2 job. I have to w/hold more because claiming "married but at the single higher rate" doesn't w/hold enough.

 

[googily]

I'm running into this for the first time, but I'm still kind of confused. I am still working, so I have withholding. Then I just made a q4 estimated payment, a very large one, because I forgot at some point that I had changed the SALT number in my tax tracking spreadsheet and owed $20k more than I was thinking. [emoji2962] (Lots of really big withdrawals earlier this year.)

A test run with TurboTax 2021 told me I still have a penalty even though I paid more than 110% of last year's taxes and had withholding done throughout the year (?).

I could have done a last minute withdrawal from my IRA that was just 100% withholding, but it would have bumped me into the 32% bracket and raised my overall amount due, and that vs a $157 penalty is a no brainier.

Still kind of hoping that my real TurboTax 2022 data dispenses with the penalty, but whatever...

 

[audreyh1]

I'm running into this for the first time, but I'm still kind of confused. I am still working, so I have withholding. Then I just made a q4 estimated payment, a very large one, because I forgot at some point that I had changed the SALT number in my tax tracking spreadsheet and owed $20k more than I was thinking. [emoji2962] (Lots of really big withdrawals earlier this year.)

A test run with TurboTax 2021 told me I still have a penalty even though I paid more than 110% of last year's taxes and had withholding done throughout the year (?).

I could have done a last minute withdrawal from my IRA that was just 100% withholding, but it would have bumped me into the 32% bracket and raised my overall amount due, and that vs a $157 penalty is a no brainier.

Still kind of hoping that my real TurboTax 2022 data dispenses with the penalty, but whatever...

Make sure TurboTax includes form 2210. That may resolve your issue or. at least reduce a penalty. The problem can be the timing even if you pay 110% prior year taxes it has to be in 4 equal installments. Throw withholding into the mix and I can see how it would be confusing.

 

[scrinch]

I'm in the "pay taxes while taking RMD" crowd. I have to deal with the RMD anyway (at least schedule it with Fido), so why not use Fed and State withholding to pay all my taxes too? That's like paying quarterly taxes in zero (additional) steps.

The one drawback...I do miss licking the stamps!

 

[audreyh1]

I'm in the "pay taxes while taking RMD" crowd. I have to deal with the RMD anyway (at least schedule it with Fido), so why not use Fed and State withholding to pay all my taxes too? That's like paying quarterly taxes in zero (additional) steps.

The one drawback...I do miss licking the stamps!

When we reach RMD age we’ll reevaluate. DH plans to do QCDs with his.

I haven’t used stamps to pay estimated taxes in two decades!

 

[Surewhitey]

Despite my accountant's hair pulling, I don’t pay quarterlies. Couldn’t be bothered. I pay the fine, write one check. "Leave me alone! See you in April".

(and get off my lawn)

80% of my income is from my IRA and I pay the taxes at time of withdrawal anyway. So the penalty on what is left is worth avoiding the hassle of having to worry about it.

Similar, but different here. DW pulls her hair when I ask her to up her withholdings every other year for my self employment taxes so I don't have to pay quarterlies. She feels like she's paying "all my taxes" instead of, logically thinking it's "all the same bucket at the end of the day". We really upped it this year to include an additional $5k for paper I-bonds too...

 

[Thomasbob]

Clarify the December tIRA WH in the tax code

FoxCreek9 posted a link to an article explaining the "trick" of not paying quarterly but giving Uncle Sam all your taxes due (Safe Harbor from previous year or 90% of estimated for current year) in December via withholding from a tIRA withdrawal. The article quoted IRC 6645(g)(1) but i cannot find that tax code section, everything seems to have changed even though that article is from 2020.


Can anyone point me to the Tax Code so i can convince my CPA and Fiduciary that this is legit??


Thanks guys, learning lots here. Wife and i exist on a small pension and tIRA withdrawals as we move taxable $$ to Roth prior to taking SS at age 70. Plan is reinforced here and works for us with all the scenarios we run.

 

[Jerry1]

FoxCreek9 posted a link to an article explaining the "trick" of not paying quarterly but giving Uncle Sam all your taxes due (Safe Harbor from previous year or 90% of estimated for current year) in December via withholding from a tIRA withdrawal. The article quoted IRC 6645(g)(1) but i cannot find that tax code section, everything seems to have changed even though that article is from 2020.


Can anyone point me to the Tax Code so i can convince my CPA and Fiduciary that this is legit??

If you have to convince your CPA that this is legit, you should look into getting a different CPA. I worked at a CPA firm for just a couple years before I move over to industry. The practice FoxCreek described is totally legit and I never made it past junior accountant. We used withholding at the end of the year to cure estimated tax under paying frequently. Hold harmless rules are well spelled out and the fact that withholding is considered paid equally throughout the year is well known.

 

[pb4uski]

Similar, but different here. DW pulls her hair when I ask her to up her withholdings every other year for my self employment taxes so I don't have to pay quarterlies. She feels like she's paying "all my taxes" instead of, logically thinking it's "all the same bucket at the end of the day". We really upped it this year to include an additional $5k for paper I-bonds too...

Given what the next 6 months of inflation will likely be I'm not going to get new IBonds this year. Yield on money market fund is much better.

 

[Sunset]

Similar, but different here. DW pulls her hair when I ask her to up her withholdings every other year for my self employment taxes so I don't have to pay quarterlies. She feels like she's paying "all my taxes" instead of, logically thinking it's "all the same bucket at the end of the day". We really upped it this year to include an additional $5k for paper I-bonds too...

That's what we do, DW pays all the estimated taxes and the property tax !

Isn't that the marriage benefit

 

[Sunset]

Given what the next 6 months of inflation will likely be I'm not going to get new IBonds this year. Yield on money market fund is much better.

Same here. But am thinking of the 10 yr TIP which is ~1.2% + inflation...

 

[Badger]

I prefer not to pay withholding on any RMD, pension, SS, etc. It is easier for me to pay quarterly based on the previous year taxes owed. Since each year RMD is a little more I just slightly increase each of the quarterly payment. It has never been a problem since I take standard deduction.

Cheers!