Poll: Do You Attempt Over, Under or Pay On The Money With Your Estimated Tax Payments?

[Midpack]

I always planned to overpay about $400 for the year on both Federal and State estimated tax payments, and applied that to the next year. So I didn’t have any refund or amount due. It always bothered me there was no acknowledgement from the IRS, but the amount always seemed to be there for the next year.

But I’ve decided I’m going to shoot to underpay about $400 every year going forward, it’s way easy to pay direct from checking with TurboTax eFile. Close enough to avoid any penalty, but if I’m paying an amount due, I can clearly see the IRS has accepted my return. Yes, I know they might com knocking later, but it’s nice to know they’re accepted on the first pass (and probably unlikely there would be a second pass).

Not a big deal, I just prefer knowing the IRS has initially agreed with my return. And they took the money within 2 days this year!

 

[TickTock]

I voted on the money, with one caveat - to first ensure we're in the safe harbor rules to avoid penalties.

 

[Ronstar]

I pay 110% of previous years tax without attempting to overpay, underpay, or get as close as possible to the anticipated tax bill.

 

[aja8888]

I pay 110% of previous years tax without attempting to overpay, underpay, or get as close as possible to the anticipated tax bill.

I do the same.

 

[frayne]

If I can estimate and come within $500 plus or minus come tax time, I consider it a win.

 

[calmloki]

I like the safe harbor of paying as much as we paid the prior year; don't care to make interest free loans. This year, for the first time ever, really blew it by being uncharacteristically charitable. Resulted in a refund that they claim can take months to post meaning an interest free loan to the gubermint. While I pay the government taxes on the T-Bills we own I betcha characterizing that interest free loan as some sort of loss on my taxes next year would get me in deep doodo.

 

[IncomeOriented]

Pay as little as possible. Doesn't bother me to pay a small penalty, as long as it's small like $100-200. Still works out that I overpay and get a refund some years, pay a little with no penalty some years, and pay with a penalty some years. Basically I aim low and don't allow a small penalty to worry me.

 

[FIYes]

I prefer to overpay and get a small $100-$200 refund. That way I know I have a little wiggle room if I have a small increase in income.

 

[ShokWaveRider]

I assume the OP means the regular monthly estimated payments. I do it once per year in December, and I do a little under. I would rather pay a small amount in April than wait for a refund.

 

[OldShooter]

I also pay once in December, shooting to slightly overpay vs the safe harbor amount. Conservative, I guess, but I'd rather not risk underpaying and getting clipped a few pence in penalty.

 

[pb4uski]

I seek to underpay by a few hundred so if a fraudster files a fraudlent return and gets a refund from the IRS then I think that I less of a problem.

 

[HI Bill]

Each time I sell a tranche of equities that will be taxed (whether they be tax-deferred or taxable), I re-run my end of year tax estimate on IRSCalculators.com, estimating my remaining dividends. I then make an estimated payment based on that amount. I don't do quarterly estimated payments, but make estimated payments whenever I sell a large amount of taxable assets.

 

[YellowSubmarine]

Never an issue. I did the EST since the early 80s. My payment is always based on last year's tax return; and I settle up in April.

 

[COcheesehead]

I don’t pay estimated taxes. I do it all through withholding on distributions.

 

[Koolau]

I don’t pay estimated taxes. I do it all through withholding on distributions.

That's the way we do it. I think paying quarterly is likely more efficient, but also more w*rk and hassle. It's just easier to do it through withholding on distributions.

 

[Dtail]

I calculate the amount owed (get pretty close), then purposely underpay so I owe monies at tax time, but always less than 1k.
I don't want to follow when a refund is coming.

 

[SecondCor521]

I aim to hit a safe harbor + $1. This year it will be through a combination of withholding and estimated payments.

Whether that results in a refund or amount due depends on my overall tax strategy. I prefer owing them than the reverse.

Resulted in a refund that they claim can take months to post meaning an interest free loan to the gubermint.

The IRS only has a certain period of time - 45 days I think - to get your refund to you. If it's longer than that, they will pay you interest. If they pay you interest, that interest is taxable income in the year in which you receive it.

 

[RunningBum]

safe harbor is my guide

 

[akck]

I also withhold from distributions. I maintain tax spreadsheets, updating them with the latest tax brackets and deductions. So far, I’ve been able to keep final due payment within $50 each year.

 

[Flyfish1]

Pay as little as possible. Doesn't bother me to pay a small penalty, as long as it's small like $100-200. Still works out that I overpay and get a refund some years, pay a little with no penalty some years, and pay with a penalty some years. Basically I aim low and don't allow a small penalty to worry me.

This is what I do. I pay once in Dec. or early Jan. Still with complicated taxes as the business completes my buy out. Every year I would tell my accountant it will get simpler in the future, then he retired!!

 

[cathy63]

Close enough to avoid any penalty, but if I’m paying an amount due, I can clearly see the IRS has accepted my return.

That's not really how it works. When TurboTax (or anyone else) e-files your return that has a balance due, there are two transactions created on the IRS side. One is the return getting handed off to the e-file system and the other is the pending payment in EFTPS. If the IRS rejects your return immediately because of something like a name mismatch or your SSN having already been used on another return for the same tax period, then the payment transaction will never be created. Typically you get an email within a few minutes after e-filing that tells you whether your return passed this first acceptance test or not.

If the IRS accepts your return at the initial submission and the payment transaction is created, that amount will be collected on or shortly after the date you specified, even though your return may not have been processed yet and could still be modified by the IRS. Lots of people get letters when the return goes through the document matching phase because they left out a 1099-B or a W-2, and sometimes these letters saying you owe more money come way after the payment has been collected. They won't modify the payment amount for you, even if they do process your return before the scheduled payment is collected.

So, seeing the money leave your account just means that the second part of the "e-file with direct debit" process worked, it doesn't mean that the IRS agrees you paid the right amount.

 

[Car-Guy]

I'll usually overpay by a couple of hundred. When I get my refund electronically deposited, I know my hard copy return (I don't efile) has been processed and no major errors have been found. Or at least that's why I do it that way. I've had audit like questions a few times in the past 50 years but never after I've received my refund.

 

[Al18]

I don’t pay estimated taxes - I do withholding. I adjust my withholding to get a $750-$1000 refund check. With the moving parts in retirement including RothIRA conversions, SS, I would rather get a refund. It’s also an incentive for me to file my taxes early.

 

[COcheesehead]

That's the way we do it. I think paying quarterly is likely more efficient, but also more w*rk and hassle. It's just easier to do it through withholding on distributions.

If you wait until the 4th quarter and take it as an RMD with withholding, you can pay almost the exact amount. IRS views it as having been paid equally throughout the year. Seems pretty efficient.

One of the tax tips I learned on this forum.

 

[ShokWaveRider]

If you wait until the 4th quarter and take it as an RMD with withholding, you can pay almost the exact amount. Seems pretty efficient.

That is what we do, but from a MYGA. Very efficient and leaves one's money working till the end of the year.