Should I increase my final estimated tax payment?

[dcon]

TurboTax calculated my 2022 estimated tax payments based on 100% of my 2021 tax paid.  I made the first 3 quarterly payments per plan.  In June I decided to go ahead with starting my social security payments.   It took a while to get it sorted, but in Oct I received the payments for July-Sept and subsequent payments.   As a result, my 2022 total income is quite a bit higher than 2021.  

The 4th quarterly estimated tax payment is due on Jan 17.   Should I adjust the payment to more accurately reflect the increased income?

Thanks.

[Anonymous_ · Accepted solution]

Yes, most likely you should.

See https://www.irs.gov/pub/irs-utl/reentry_council_mythbuster_federal_taxes.pdf

[dcon]

I am 100% sure that you replied to the wrong message.  

[VolvoGirl · Accepted solution]

It depends how much other income you have.  Only part of SS can be taxable.

Up to 85% of Social Security becomes taxable when ALL your other income plus 1/2 your social security reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid 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. It is included in your tax due or reduces your refund.

[fanfare · Accepted solution]

100% of last year's tax is sufficient.

You won't owe a penalty no matter how large your income is this time, regardless of source.

You would pay now on Jan 17th to avoid paying later on April 18th

[dcon]

Thanks.  The SS money is all taxable.  My 4th estimated tax payment will take me to 100% of the tax shown on my prior year return.  My rough estimate for 2022 tax is about double my prior year return because of the SS $.

[KrisD15 · Accepted solution]

No, you needn't increase your final estimated payment because of your additional income.

As the answers above point out, as long as you have paid your 2021 tax liability (the total tax on your 2021 income, not just the balance due) you will not have a penalty for underpayment added. 

We understand that your income may be higher this year and also that your TAX LIABILITY may be larger for Tax Year 2022 than it was for Tax Year 2021, therefore you may have a tax balance due, but if you paid your Tax Year 2021 tax liability by way of Estimated Tax Payments, you will not incur a penalty for underpayment. 

Below is a link to an IRS Tax Topic which may provide more clarity.

IRS Tax Topic 306

[fanfare]

for high earners it is 110% of your previous tax as adjusted ( AGI was over 150,000)

Also, 85% of SS benefits are taxed, not 100%. you'll see that when you fill out the 1040 using tax software.

@dcon