Understanding Federal Estimate Tax Payment

[IamTDR]

My wife and I both receive W2's from our employer who withholds Federal Tax from our bi-weekly paychecks.
This past calendar year, we owed $3,000 on Federal Taxes.  Since then we updated our W4 to withhold more for Federal Taxes. (Claiming 0 Dependents now instead of 2--we have two young children)  Hopefully the additional withholding from our bi-weekly paychecks will result in a lower Federal Tax payment next year or even a refund.

However, after completing my Federal return I received a Quarterly Estimate Tax Payment voucher for $1,500.

As I already adjusted our W4s am I still required to make quarterly estimate payments?  Doing so seems like I would just receive a nice refund the upcoming calendar year. My concern is that we would are subjected to penalties if I do not make estimate tax payment.  Reading the text, it seems estimate tax payments are required if you owed more than $1,000 on your Federal return.  Quarterly Estimated Tax payments make sense if you are a independent contractor, but in our case we have federal tax withheld bi-weekly. (in the prior year just not enough)

Looking for guidance .
Thanks in advance

[leeloo]

The program automatically prints vouchers when anyone has a balance due. It is assuming that the situation will be the same and is giving you needed information. If you handled it on your own, you can disregard the vouchers .

[AnnetteB6 · Accepted solution]

Just to confirm, leeloo is correct.  If you have already increased your withholding amounts, then you do not need to make any estimated payments unless something else changes in your situation throughout the year.  Additionally, the vouchers were created for your convenience, but nothing has been sent to the IRS with regard to estimated payment vouchers for 2023.

To learn more, take a look at the following TurboTax help article:

Why did 1040-ES estimated tax vouchers print out? Do I need them?

@IamTDR 

[IamTDR]

Thank you for the quick replies.
My follow up question is, the $3,000 I just paid in regards to Federal Tax for tax year 2022, did the $3,000 include penalties already or can I expect some notice from the IRS?

@AnnetteB6 
@leeloo 

[leeloo]

The answer would be on your return. Does the $3,000 include any amount on Line 38?

37 Subtract line 33 from line 24. This is the amount you owe.

38 Estimated tax penalty (see instructions) .

[IamTDR]

@AnnetteB6 
@leeloo 
Correct. On my Turbo Tax prepared Federal Tax return, line 38 is blank. My tax amount owed is based on subtracting line 33 from line 24.
Assuming this means no penalty was applied or will be applied?

[Mike9241]

here are the federal rules to avoid penalties

There will be no federal penalties for not prepaying enough taxes for 2023 if withholding and
a) timely estimated tax payments equal or exceed 90% of your 2023 tax or
b) timely estimated tax payments equal or exceed 100% of your 2022 tax (110% if your 2022 adjusted gross income was more than $150K) or
c) the balance due after subtracting taxes withheld from 90% of your 2023 tax is less than $1,000 or
d) your total taxes are less than $1,000

state laws differ
********************

the reason for the 2023 estimates - my guess is that your adjusted gross income went over $150,000 for 2022 while your withholding & estimates exceeded the safe harbor requirement (b) above for 2022 because it was based on 100%  of 2021 taxes but now you must reach the 110% threhhold. 

[IamTDR]

In regards to footnote A), my taxes owned were 88% of my taxes paid in 2022.  So it seems I'm subject to an IRS penalty.  Reading it seems like the typical penalty is 0.05%.  Confused if that's on the total amount owed this tax year.  Otherwise not sure how that would be calculated as taxes withheld bi-weekly via our paycheck.

Tax year 2022 my spouse and I both received unexpected promotions.