estimated taxes due to scholarships

[MK151]

My college student had to pay  around $1200 in taxes due to a large scholarship/grant amount that exceeded the educational expenses by a lot. He also had a small (2K) SE income which he won't have this year. After we filed his taxes and printed the paperwork, I see that it requires him to make estimated payments of $300 every quarter. I am surprised because he doesn't have any income and this year we paid his taxes from the refund we got since he is our dependent. I was wondering if this payments are set and mandatory, can't we just pay the taxes at once when we file next year? We don't even know if he'll receive the same amount in scholarships since it's still too early to know about the new school year starting in the fall.

Does anyone know more about how exactly this is supposed to work or have any experience with that?

Thank you.

[Bsch4477]

You’re not required to make those payments. The program generates those forms based on the current tax liability. From what you have posted about projected income you don’t have to do anything. 

[MK151]

Well, if his scholarships stay the same he will probably have to pay close to this year's taxes, wouldn't we be penalized for not making those payments?

[Bsch4477]

No penalty if tax liability is under $1,000. The absence of his self employment income should put him under that amount. 

[MK151]

I get it, thank you. How about if he gets a summer job with W2 form? And in case he'll have a new self employed income, then we need to make some payment during that corresponding quarter? 

[Bsch4477]

The W-2 will withhold tax for him. If he has self employment he could do an appropriate estimated tax payment. 

[MK151]

So in case of new SE income and need to make an estimated tax payment in the corresponding qarter, do we calculate it only over that SE income amount alone, or we actually have to match the about 1K for his scholarship plus the new SE part to carch up? How would that work so we don't pay a penalty in this case if we get over 1K Owed?

[MindyB]

Yes, that's correct, you can make estimates if (when) he has self-employment activities, and payroll withholding should cover his W-2 income (verify he completes a W-4 with his employer).

You'll ensure there will be no penalties incurred by paying in 100% of the 2024 tax in 2025, so if you want peace of mind, you can make the estimates. Otherwise, if tax due for 2025 is over $1,000, you'll need to have paid in 90% of the tax due.  

See: Form 1040-ES

[MK151]

Thank you so much for all the helpful info and advice. So if no SE income we are good and no est. payments needed. Just have to remember if any new SE income arises to make sure we had paid 90% of the future taxed owed before the end of the year. I assume doesn't matter if is just one lump payment in last Q or something like that.

Thanks again.