Tips? My first estimated tax payment

[always_learning]

I'm needing to make my first-ever estimated tax payment and want to be sure I understand things.

I see that I can use IRS Direct Pay or register for EFTPS to make a direct payment. We don't have an EFTPS account yet, so Direct Pay it is. Does anyone have any cautions or concerns about using the Direct pay option?

The payment will be the mid-five digits. Should I break it up into one smallish test payment first, of around $5,000 then send the rest after it goes through or is it safe/good enough to make the whole thing at one time? I'm thinking about user error or whatever, which is why I'm asking this. The only other time I have ever had to electronically send such a large amount of money was for a home down payment and that made me nervous, too. The first time when doing things like this is a bit scary.

Thanks in advance for any thoughts/advice.

 

[MBAustin]

I've used DirectPay for several years with no significant issues. The only problem I had was when one year I decided to follow the directions literally when it says to put in YOUR name and SSN (I had previously used DH's identity as he's listed as "taxpayer" on our return while I am "spouse"). That didn't work. So I called the IRS and actually got a human being on the phone after a long wait, she said "well, go ahead and try it with your husband's info" and of course it worked fine. I suggested they might want to reword the webpage to say "taxpayer" instead of "you" but IIRC they haven't done that. So as long as you use the taxpayer id, you should be fine.

 

[always_learning]

Thanks. I had planned to use DH's name since he's listed first on our taxes but I'll be even more sure to do that now.

What are your thoughts on breaking up my large payment? Too cautious on my part or a not-too-bad idea for the first time? I tried clicking through to see how things are done, but have to enter too much info to get anywhere helpful so I exited.

 

[aja8888]

An EFTPS account is the best way to go. Very simple and you can set up payments in advance. Many of us here have used the system for years.

 

[always_learning]

An EFTPS account is the best way to go. Very simple and you can set up payments in advance. Many of us here have used the system for years.

Yeah, I think this is the way I'll go from here on out.

I didn't realize until today that I need to have a letter mailed snail mail since I'm a first-time user and I'm not sure it would get here in time for me to use it.

Although, I guess I could try it and just use Direct Pay if the letter doesn't arrive on time.

 

[Gill]

If it's the January 15th payment you need to make, why not just mail a check along with Form 1040-ES.
Gill

 

[cathy63]

There is no need to split up the payment. With Direct Pay, you can only make 2 payments in 24 hours, so if anything does go wrong, you risk being unable to fix it until the next day. Direct Pay will process payments up to $10M, so mid-five figures is just a small amount to them.

If you don't already have one, register for an online IRS account so you can follow up and verify the payment was received later on. Unfortunately payments submitted between Dec 23 and Jan 22 won't show up there until Jan 24, but at least you'll be able to check then.

 

[foxcreek9]

If you are over 59 1/2, there is this IRA “trick”

https://financialducksinarow.com/16...bwSCMSPDGrJfC3G6NnwaNfVZPjsZfwCqL_xhzh0xixys8

 

[Another Reader]

I tried setting up Direct Pay today. I had to set up ID.me, which I don't like. It would not accept my driver's license upload. So I closed out of that. EFTPS looks much easier. I think I might have had an account a few years ago. Maybe I will give that system a go tomorrow.

 

[Dash man]

I’ve been using EFTPS for several years and it’s a piece of cake. You do have to get a pin from them, but I don’t think it took long. But that was pre-Covid.

 

[mountainsoft]

I have never used DirectPay, but I have used EFTPS for years. I originally set up the account to pay estimated taxes for my business. However, I also use it to pay taxes when I am doing Roth conversions.

 

[EastWest Gal]

I’m confused. If you are starting quarterly tax payments in 2022, your first payment will be due April 15th. The January 15th payment is for tax year 2021. That will give you time to set up an EFTPS account.

I’m using EFTPS for the first time this year. Again, something I learned about here.

 

[Midpack]

I’ve also used EFTPS for years, easy peasy.

 

[JARON46]

I have been using EFTPS since 2015, I pay monthly after my pension check is deposited in my checking account. I can log on to my IRS account in a few days and see the payment there.

 

[mrfeh]

I've only used DirectPay for many years now. No problems have been encountered.

Don't forget your state tax also; there should be an online option.

 

[Ole Red 29]

I used DirectPay my first year of retirement with no problems. The cons were you could not schedule future payments, you couldn't see a history of your payments, you had to remember when to make payments and you had to put in your ID information everytime you logged in to make a payment. Now, with EFTPS, each year I schedule my first 3 quarterly payments at the first of the year and schedule my 4th payment at the end of the year (when I have a better idea of my actual income). Much easier.

 

[londo]

I enrolled with EFTPS the week before Christmas, and my letter/pin from the IRS is apparently arriving in today's mail. So a couple of weeks turnaround during a heavy mail season with a couple of holidays in there. Anyone enrolling in EFTPS today *may* get their IRS response in the mail before Jan 15.

 

[RASAP]

If you are over 59 1/2, there is this IRA “trick”

https://financialducksinarow.com/16...bwSCMSPDGrJfC3G6NnwaNfVZPjsZfwCqL_xhzh0xixys8

If I take advantage of this "trick", does TurboTax have a way of handling it such that it does not assess a penalty?

 

[dmpi]

I've used Direct Pay many times. Just make sure you have the correct Reason for Payment (Estimated Tax) and the correct Tax Year. When you're done make sure you printout the receipt form at the end for your own records. The IRS never tells you what estimated tax you've submitted. I have to remember it myself when I do my taxes.

 

[cathy63]

If I take advantage of this "trick", does TurboTax have a way of handling it such that it does not assess a penalty?

Yes. It automatically puts withholding that is reported on a 1099-R on line 25b of your 1040. As long as the sum of lines 25 a through c is enough to reach one of the safe harbors, you are not subject to an underpayment penalty.

Estimated payments go on line 26, and these need to be both timely and sufficient to avoid an underpayment penalty.

 

[Ian S]

If I take advantage of this "trick", does TurboTax have a way of handling it such that it does not assess a penalty?

I would hope so! You get a 1099-R which is the same as what you get for a pension for example and there's a box showing the taxes withheld. No way of knowing that the taxes weren't taken out evenly over the year and the IRS - and presumably TT - will assume they were. I've done this for several years and H&R Block gets it right.

 

[COcheesehead]

I’ve used direct pay without issue.

 

[Exchme]

I set up Direct Pay last year and thought that was laborious. Since my wife's name is primary on our cellphone account, I couldn't use that, so I was one type of ID short. To sign up, they had to mail me a letter with a code on it. Now I see that will be no good by this summer, they are switching to ID.me which will make me start over and require even more documentation. I read on BH that they even need a video call to prove you match the picture on the ID you supply.

I guess once that happens, I will set up EFTPS instead as I don't enjoy jumping through hoops just to send them $.

 

[COcheesehead]

I set up Direct Pay last year and thought that was laborious. Since my wife's name is primary on our cellphone account, I couldn't use that, so I was one type of ID short. To sign up, they had to mail me a letter with a code on it. Now I see that will be no good by this summer, they are switching to ID.me which will make me start over and require even more documentation. I read on BH that they even need a video call to prove you match the picture on the ID you supply.

I guess once that happens, I will set up EFTPS instead as I don't enjoy jumping through hoops just to send them $.

Are you sure it was direct pay? I signed up for EFTPS and they had to send me a letter with a PIN code. Direct Pay was pretty much ready to go after I signed up.

 

[swakyaby]

I’ve used eftps for 2 years, and more recently used IRS Direct Pay. Eftps does take more time to set up initially, because you have to rely on them to mail you a PIN number. There is no registration or passcode required to use Direct Pay, but for security they require you to know some numbers from a prior tax return before you can schedule a payment. One poster here said that IRS Direct Pay does not allow you to look up your pending payment or review your history of payments, but actually you can do those things if you take the time to set up an account. For both sites, it’s important to keep a record of the confirmation code given when you set up a payment.