Incorrect Estimated Tax Payments

[hwy101man]

I just completed my 2022 taxes on TurboTax.  Last year I had to make quarterly tax payments but this year I am receiving a substantial refund. My TurboTax program stated that I need to make four quarterly payments for 2023.  I called the IRS and they told me that because I am getting a refund, I do not need to make quarterly payments.   Is this a flaw in the program?

[BillM223]

No, this is not a flaw, it is a courtesy to you.

If you made quarterly payments in the previous year, as a courtesy, TurboTax provides copies of the 1040ES with which you can make quarterly payments this year for next year. You are not required to use these forms, and if you do, you can change the amounts to whatever is appropriate for year.

Having a refund in tax year 2022 is no guarantee that you will avoid a penalty for the underpayment of estimated taxes in tax year 2023. 

You may or may not need to make quarterly payments in 2023; TurboTax does not have a crystal ball to know what 2023 will bring to you. But these 1040ES forms give you a starting point. Make your own estimates and change the numbers on the forms if you want or just throw them away if you estimate that you won't need them.

[Critter-3]

What are federal estimated taxes?

SOLVED•by TurboTax•1152•Updated 3 weeks ago

These are quarterly tax payments made to the IRS for income you received that wasn’t subject to federal tax withholding.

If you receive significant non-wage income, such as from self-employment, interest and dividends, or rental income, you'll likely need to pay quarterly estimated taxes or run the risk of underpayment penalties in addition to a large year-end tax bill.

If you’re at risk for an underpayment penalty next year, we'll automatically calculate your estimated tax payments and prepare 1040-ES vouchers that include the payment due date.

Related Information:

• Where do I enter my estimated tax payments?
• How does TurboTax calculate my estimated tax payments?
• How do I make estimated tax payments?
• Can TurboTax calculate next year's federal estimated taxes?
• When are federal estimated taxes for individual returns due?

[AmyC]

Topic No. 306 Penalty for Underpayment of Estimated Tax - IRS states:

If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. 

Trust what the IRS prints above what an agent says.

[VolvoGirl]

If you are receiving a refund or low tax due and TurboTax prepared the vouchers then your tax liability was probably reduced by credits.   It is the tax you owe on your income.  But you might qualify for credits that can reduce your tax due or even give you a refund.

Turbo Tax is very conservative and doesn't want you to owe next year.  They might have printed out if you got a big one time increase in income.   like if you took a IRA or 401K Withdrawal or had a big stock gain.  They are optional to pay.  They don't get sent in with your tax return so the IRS won't be expecting them.  You can ignore them.

[fanfare]

See Form 2210 instructions to see how to use 1040-ES to avoid penalties.

once you get hit with a penalty you become motivated to study the Instructions more carefully.

If you see future1040-ES from TurboTax it is a warning that you were under-withholding in 2022.