Turboax Estimated Tax Calculation

[mitchden1]

I had to pay several thousand dollars on my 2022 1040-RS because I hadn't withheld sufficient money from my social security, pension, etc. Why does Turbotax calculate Estimated Payments for 2023 that are about 50% more than the amount I owed for 2022. My withholding hasn't changed. Does it build in an increase in my taxable income?

I used my 2022 return and modified it to reflect my higher expected 2023 taxable income. Again Turbotax calculated the Estimated Quarterly Payments to be significantly more than what they should be - based on the calculated amount I owe (Line 37 of the 1040-SR).

I don't want to overpay my estimated taxes.

I hope my questions are clear. Thank you.

[MonikaK1]

TurboTax is calculating the amount of tax you would need to pay in for 2023 in order to avoid an underpayment of estimated tax penalty based on your 2022 taxes.

Your federal income tax withholding (plus any timely estimated payments you plan to make) should amount to at least 90 percent of the total tax that you will owe for tax year 2023, or at least 100 percent of the total tax on your 2022 return (110 percent for AGIs greater than $75,000 for single and separate filers and $150,000 for married filing joint) to avoid a penalty.

The 2023 tax year—and the return you'll file in 2024—will have the same seven federal income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

There are a number of tools you can use to calculate your estimated taxes for 2023.

When you prepare your 2022 return, TurboTax will automatically calculate your 2023 estimated tax payments and prepare 1040-ES vouchers if you may be at risk for an underpayment penalty next year.

You can also calculate your 2023 estimated taxes and generate the payment vouchers by following the steps below. If you want to recalculate them after filing your 2022 return, you will need to wait until your filed return is processed (payment acknowledged / refund received) before reentering your return. See here for the process to open/amend a return that has been filed.

To calculate estimated taxes and prepare Forms 1040-ES:

1. With your tax return open, search for 1040-es (be sure to include the dash) and select the Jump to link
2. Answer No to the question Do you want to change your W-4 withholdings for 2023?
3. Answer the questions about things like your 2023 filing status, income, and deductions
4. Eventually, you'll come to the Print Vouchers? screen. Answer Yes and we'll include your 2023 1040-ES payment vouchers when you print a copy of your return later

In addition, TurboTax's TaxCaster is available without opening your return and will estimate your total taxes for 2023.

You can also use the IRS Withholding Estimator to calculate amounts to be withheld from wages.

Please also see this TurboTax tips article for more information about estimated taxes.

[mitchden1]

Thank you for your response, however, I'm still confused. For 2022, my payment due was $3,900. My withholding was $20,000. so my 2022 total tax was $23,900. Turbotax calculated my Estimated Quarterly Payments for 2023 as $1,570. (Total is $6,270).  Since I only owed $3,900. for 2022, why is my estimated payments for 2023 equal $6,200. I would have thought it would be about $4,000.

[JohnW152]

It's difficult to tell what's going on, since you don't state what your filing status or adjusted gross income are for tax year 2022, but if your total tax was $23,900, it seems very possible that your adjusted gross income was higher than $150,000, or $75,000 if you were married filing separately.  That would trigger the 110% of actual taxes figure when creating one part of the estimated payments calculation.

The second part of the calculation would be based on 90% of your estimated 2023 taxes.  Since you modified your 2023 projections, that raised this portion of the calculation.

The TurboTax program would then use the lower of these two amounts to calculate your estimated tax payments.

And, bear in mind, if you expect your income or deductions to change for 2023, you can revisit the adjustments you made in the estimated tax payments portion of TurboTax.

Please see the TurboTax Help article How does TurboTax calculate my estimated tax payments? for more information.

[Edited 4/4/2023 | 1:11 pm CST]

@mitchden1