Hello,
I just filed my tax return through TurboTax. Turned out I owe ~$6000 to the IRS, so I chose to pay in installments.
After I filed my returns, I'm looking at my documents and there are 4 1040-ES Payment Vouchers, PLUS another 1040-V Payment Voucher for $1000... totaling to close to $10,000 !
I also don't see this reflected in Form 9465 (Installment Agreement Request) that was generated by TurboTax. What I requested was to pay $1000 now, and then monthly $1000 payments, all through direct deposit (checking account information provided).
Also please note that I don't have to pay "estimate taxes", I'm not self-employed, I get a W2 and my employer withholds taxes from my paychecks.
So I'm not sure where the 1040-ES Payment Vouchers came from... I'm really confused! Does this mean I'm going to pay close $4000 in interest to the IRS?! If yes, then I absolutely don't want to do that... I can borrow from friends and family and pay the whole thing in one payment right now. How can I pay the whole thing early?
To summarize:
1. Why did TurboTax include 1040-ES vouchers in my returns?
2. What does my installment plan mean... am I going to pay exactly what I owe in 6 payments (I chose to pay $1000 now, and rest in $1000/month installments), or should I expect to pay interest?
Thanks!
Those 1040ES vouchers are NOT for payments of your 2019 tax due. They are for paying quarterly estimated payments toward your 2020 tax. If you expect to owe at least $1000 for 2020 when you file next year, that is what those are for--so that you can avoid an underpayment penalty next year.
You will receive letter from the IRS that will detail how your payment plan for the 2019 tax due will work.
Those 1040ES vouchers are NOT for payments of your 2019 tax due. They are for paying quarterly estimated payments toward your 2020 tax. If you expect to owe at least $1000 for 2020 when you file next year, that is what those are for--so that you can avoid an underpayment penalty next year.
You will receive letter from the IRS that will detail how your payment plan for the 2019 tax due will work.
Have a similar question about 20211040 ES Payment Vouchers. I received a one time special payment in 2020 from my employer (besides my regular salary). When the payment was made taxes were not withheld on half of the payment. My employer reported the income to IRS, half as regular income, the other half was reported on a Form 1099-INT. I filed my taxes and paid additional taxes on the funds reported on the Form 1099-INT. I E-Filed and paid my taxes due for 2020 in whole. Return was accepted by IRS. I printed up return. Four quarterly 20211040 ES Payment Vouchers were printed with my return automatically. I do not expect a similar tax situation in 2021. I will increase my withholding to avoid paying taxes in 2021.
It sounds like you understand this, but in case other people see this thread, the way it works is this:
You are required to "pay-as-you-go" in terms of federal and state taxes. That is, generally if you owe more than $1,000 (the number varies) at the end of the year, you may be penalized for the underpayment of estimated taxes.
Most employees don't have this problem, because the withholding should have been set to withhold enough. However, you are responsible for checking this. I encourage you to use the IRS' Tax Withholding Estimator to make sure your withholding is enough.
On the other hand, it is common for the self-employed and taxpayers with non-wage income to have to pay estimated taxes.
Note: based on your 2020 data, TurboTax will generate 4 1040-ES forms, one for each quarter to pay estimated taxes in 2021.
HOWEVER, you are not required to actually use these forms. If you believe that your tax situation is such that your employee withholding will cover the taxes that you will owe by the end of the year, then you don't have to make any estimated tax payments.
Your description of the one-time employer payment in 2020 which you will not repeat in 2021 would seem to match this situation.
Make sense?
Filed taxes yesterday, prompted to enter into 1040es payments, however our income is reduced by at least 35% for 2021 so no taxes should be due after standard deductions and child credits. Am I still liable to make the remaining payments? Is there anything I need to do or file to resolve this? Don’t want to make payments I cannot afford or owe.
@Thetallred1 wrote:
Filed taxes yesterday, prompted to enter into 1040es payments, however our income is reduced by at least 35% for 2021 so no taxes should be due after standard deductions and child credits. Am I still liable to make the remaining payments? Is there anything I need to do or file to resolve this? Don’t want to make payments I cannot afford or owe.
Estimated tax payments for tax year 2021 using a Form 1040-ES are completely optional. You do not have to pay estimated taxes if they are not needed and the 1040-ES is not reported to the IRS if you do not file the form.
@DoninGA Thank you, I am unsure why I was prompted to do so, all of our income is taxed and reported on the W2 from employers. Turbo Tax is generally very easy to use on a desk top and guides the user very well. However the IOS platform is a bit lacking and had me going in circles. Maybe that’s where it came from.