estimated taxes due in mail today

[jebmke]

EFTPS set up for three quarters in April (took one minute); will true up in December.

 

[mountainsoft]

I have both the EFTPS (and the equivalent service for the State of Louisiana) set up to automatically pay them for me today by automatic deduction from my checking account.

I didn't know EFTPS did automatic withdrawals. Good to know when we retire and our income is more steady.

Right now I use EFTPS to pay the estimated taxes for my home business. My income varies wildly from month to month, so I pay my estimated taxes at the first of each month. It's easy to remember and I'm not left with a big bill to pay in months when income may be down.

 

[Alan]

I didn't know EFTPS did automatic withdrawals. Good to know when we retire and our income is more steady.

Right now I use EFTPS to pay the estimated taxes for my home business. My income varies wildly from month to month, so I pay my estimated taxes at the first of each month. It's easy to remember and I'm not left with a big bill to pay in months when income may be down.

It’s quite a nice feature. A few days before a payment is taken you receive an email reminder so can be sure you have money in the account, or you can log onto EFTPS and cancel the payment.

 

[ERD50]

While EFTPS is likely the best solution for many, I just realized another way to do this with an annual payment, with essentially no extra effort at all, even if you don't take RMDs.

If you are doing ROTH conversions, that's another place where you can set your withholding, and the IRS deems it the same as being done in quarterly installments. I looked at Fidelity, and it's just an entry on the form to process the ROTH conversion, so a few clicks/strokes at the same time you get that set up. And I can do my IL State w/h at the same time. Easy-peasy.

https://www.fidelity.com/static/dcle/ira/documents/Roth_IRA_Conversion.pdf

So that's RMDs, ROTH conversions, and SS withholding options that many of us have available. And while it's not a big deal, I'd rather not set up a separate EFTPS account if I can avoid it, especially as I'd have to do a separate one for my IL state withholding as well. And also a little nicety that I don't even need to worry about having funds in the checking account to cover the EFTPS withdraw - again, not a big deal, but the little things add up.

-ERD50

 

[Bestwifeever]

....

They also mention that you can have w/h from SS, and that your State may not be handled by your brokerage (Fidelity does handle IL).

-ERD50

Are RMDs taxed in Illinois?

 

[audreyh1]

It’s quite a nice feature. A few days before a payment is taken you receive an email reminder so can be sure you have money in the account, or you can log onto EFTPS and cancel the payment.

This month is the first time I’ve gotten email reminders and confirmation after the withdrawal from EFTPS,

 

[aja8888]

This month is the first time I’ve gotten email reminders and confirmation after the withdrawal from EFTPS,

Interesting, I have never gotten an email reminder or confirmation. Maybe I should sign in to my account and see if there is an option to set that up, or my email address is not correct?

 

[Alan]

This month is the first time I’ve gotten email reminders and confirmation after the withdrawal from EFTPS,

I’ve just checked my email history and this month is also the first time I have had an email reminder just before the withdrawal.

After the last payment in January I log on and print to pdf a copy of the received payments for my records.

 

[ERD50]

Are RMDs taxed in Illinois?

No, I don't think so - but you can still have the w/h done by Fidelity (and others, but it depends, see below), in order to cover any other IL tax liabilities you may have.

I think some financial institutions may not offer IL State withholding from RMDs because it isn't taxed. But I know Fidelity does. I called the place I have my IRA at, since I couldn't seem to do it on-line when I checked, just in anticipation of needing to do it in the future. They said they could do it manually for me. Good, otherwise I was going to have to tell them "Sorry, I need to move my money to Fidelity!".


-ERD50

 

[mystang52]

This is the first year, in about 2 decades, that I am again paying Estimated. Yesterday (June 15) while I was on a long morning bike ride, I remembered I had to pay the taxes......and then forgot all about it. I remembered again about 10 PM.

I was about to write the check and mail it at the post office (technically -and I believe legally- that would still be a timely payment). But I did a quick check online at IRS' website, and just did the electronic payment.

 

[Golden sunsets]

Thanks for the reminder.

I'll also mention again, if you take RMDs, the simple, easy way to make estimated payments is to have them taken out of the RMD as a withholding. It can be done as a once a year withdrawal, and it still counts to the IRS the same as being done quarterly. If your RMD covers your total estimated taxes, it's "one and done".

Fidelity allows you to do this on-line for Federal, and for IL (I assume all states are covered).

I'm not taking RMDs yet, but I set this up for my MIL, and verified it all with her tax guy. A few clicks on-line at Fidelity (or other place that supports this) sure beats writing eight checks a year, and worrying if they got lost in the mail, or navigating the Fed and State sites to set up payments there.

-ERD50

This is what we did last December, the first year of RMD's for DH. Worked like a charm for both federal and state on the Merrill Lynch website-2clicks and you're done, with the balance of the RMD transferred to our BOA checking account. It has the side benefit of increasing cash flow throughout the year-no with holdings from SS or pension checks.


Sent from my iPad using Early Retirement Forum

 

[gstillson]

So how much do you need to send in? Just last year's amount that you paid in tax?

I retired in 2015 with $200,000 and have been investing it and living off the proceeds. Last year I only owed $1500 in tax on $34,000 investment income but this year I already have realized $70,000 and am a bit worried I will be hit with a penalty. Seeing this thread I sent in $5,000 yesterday with the instant withdrawal from checking thing on the irs.gov website. That was just a total guess what I will owe. I use standard deductions, married filing jointly.

 

[Cobra9777]

This thread saved my butt last night. We just got back from 3 spectacular weeks in the Dominican Republic. So I'm a bit disorganized and didn't realize this due date had crept up.

After each payment, I usually set a calendar reminder for the next quarterly payment. I must have forgotten to do that in April.

Anyway, I used the Excel estimate I did in April and made the payment with IRS Direct Pay. I'll fine tune the estimate a bit more in September and again in December. This year's taxes are relatively straightforward after selling a rental house last year.

 

[Souschef]

+1
I use EFTPS and the equivalent for CA. That way I do not have to worry about forgetting it.
CA is strange, quarterly payments are : 30%, 40%, 0%, and 30%. I had a small penalty last year because I did 25% for each quarter. That meant I was 5% shy for the first quarter, and 20% shy for the second quarter.

 

[braumeister]

CA is strange

Thank you, and you may now go to the counter and pick up your award for Understatement Of The Day.

 

[calmloki]

Had our various quarterlies ready to mail since mid-May. They sat on the desk taunting me and were mailed in June 1. Back a few decades ago quarterlies weren't done and April 15th had me in line late at the Post Office celebrating with all the other caution-to-the-wind barely on time filers.

 

[Sunset]

So how much do you need to send in? Just last year's amount that you paid in tax?

I retired in 2015 with $200,000 and have been investing it and living off the proceeds. Last year I only owed $1500 in tax on $34,000 investment income but this year I already have realized $70,000 and am a bit worried I will be hit with a penalty. Seeing this thread I sent in $5,000 yesterday with the instant withdrawal from checking thing on the irs.gov website. That was just a total guess what I will owe. I use standard deductions, married filing jointly.

You will not face any penalties since you paid way more than last year's tax bill.

But to retire with only $200K savings is not normal, unless you have a big gov't pension.

 

[whaleknives]

AFAIK, any withholding is treated by the IRS as if it was done evenly over the year.
Here's a more up-to-date source than I found at the time I started this for MIL: https://www.kiplinger.com/article/retirement/T045-C000-S004-withhold-taxes-from-your-rmds.html
They also mention that you can have w/h from SS, and that your State may not be handled by your brokerage (Fidelity does handle IL).

For me, it looks like a January Roth conversion with April to January estimated tax payments saves about $600 over January or December conversions with withholding.

Untaxed Roth returns and delayed tax payments win over taxed IRA returns with a single tax payment. Assumes 8% return (my portfolio's current 1-year) and 12% marginal tax rate.

 

[audreyh1]

Interesting, I have never gotten an email reminder or confirmation. Maybe I should sign in to my account and see if there is an option to set that up, or my email address is not correct?

I got the impression this was a new feature. This last time was also the first time I ever got an email notifying me that I had scheduled a transaction. I like that - just like I get emails from Fidelity to notify me of placed trades, initiated transfers, etc.

 

[FIRE'd@51]

Thanks for the reminder.

I'll also mention again, if you take RMDs, the simple, easy way to make estimated payments is to have them taken out of the RMD as a withholding. It can be done as a once a year withdrawal, and it still counts to the IRS the same as being done quarterly. If your RMD covers your total estimated taxes, it's "one and done".
-ERD50

If you want to do a "one and done", can you do it any time during the year, or must it be done in the first quarter?

 

[gstillson]

You will not face any penalties since you paid way more than last year's tax bill.

But to retire with only $200K savings is not normal, unless you have a big gov't pension.

Thanks. I thought that might be the case but was not 100% certain, especially if one went from a $1,500 tax bill to a $15,000 tax bill.

No pension. $200k savings seems like enough, or it has worked for the past 3 years at least. We only spend about $35,000 a year so it will likely grow quite a bit.

 

[kaneohe]

If you want to do a "one and done", can you do it any time during the year, or must it be done in the first quarter?

The general idea is that withholding is considered to have been paid evenly throughout the yr which means that it can be done anytime. Many do it late in the yr to get the benefit of a longer tax deferral period. If you do it too late tho, it might not get done in time.

 

[Souschef]

Thank you, and you may now go to the counter and pick up your award for Understatement Of The Day.

But then again, everyone East of the Rockies has that opinion.

 

[ERD50]

If you want to do a "one and done", can you do it any time during the year, or must it be done in the first quarter?

The general idea is that withholding is considered to have been paid evenly throughout the yr which means that it can be done anytime. Many do it late in the yr to get the benefit of a longer tax deferral period. If you do it too late tho, it might not get done in time.

My understanding (and experience) as well.

I set my MIL's early in the year, scheduled for late October, and I have a reminder on my calendar to verify it was all done. I could push the schedule later, but I wanted some extra breathing room, just in case something went wrong, so I'd have plenty of time to react before holiday and EOY stuff happens. Plus, she sees it on her OCT EOM in early November, so that's another reminder/verification.

It's been smooth as silk, so glad I made that change for her, and will do it for myself when the time comes (we get by with deductions from DW's current work).

-ERD50

 

[ERD50]

For me, it looks like a January Roth conversion with April to January estimated tax payments saves about $600 over January or December conversions with withholding.

Untaxed Roth returns and delayed tax payments win over taxed IRA returns with a single tax payment. Assumes 8% return (my portfolio's current 1-year) and 12% marginal tax rate.

I'm not sure I'm following this. Is it a calculation that the early ROTH contribution w/o withholding (and paying Quarterly estimates) comes out ahead, due to the extra non-taxable growth in the ROTH?

I guess I'd have to run the numbers (and I'm too tired right now), but tax on the assumed 8% growth would strike me as a rather small number, like 12% of 8%?

Are you also factoring in the part-year loss of growth in the quarterly payments? A $600 delta seems high. OK, calculator says $600 tax of 8% growth at the 12% bracket would be due on a $62,500 conversion (assuming you are converting to the top of the 12%, but you may be one bracket higher). So how can you save $600?

-ERD50