I will summarize the previous answers by virtue of some examples/scenarios.
1. For example, you owe $750 in the CURRENT TAX YEAR.
Because you owe less than $1,000, you will NOT incur in an underpayment of estimated taxes
penalty.
2. You owed $8,000 in the PRIOR year and you owe $10,000 in the CURRENT Year. You paid $8,000.
PRIOR YEAR: 100% ($ 8,000) = $8,000
CURRENT YEAR: 90% ($10,000) = $9,000
BECNHMARK TO BE MET IS $8,000 (The lesser of two)
Because the appropriate benchmark was met, you will NOT incur in an underpayment of estimated
taxes penalty.
3 You owed $15,000 in the PRIOR year and you owe $10,000 in the CURRENT Year. You paid $9,000.
PRIOR YEAR: 100% ($15,000) = $15,000
CURRENT YEAR: 90% ($10,000) = $ 9,000
BECNHMARK TO BE MET IS $9,000 (The lesser of two)
Because the appropriate benchmark was met, you will NOT incur in an underpayment of estimated
taxes penalty.
4. You owed $8,000 in the PRIOR year and you owe $12,000 in the CURRENT Year. You paid
$9,000 and your ADJUSTED GROSS INCOME (AGI) is greater than $150,000 if you are
MARRIED FILING JOINTLY ($75,00 if MARRIED FILING SEPARETLY)
PRIOR YEAR: 110% ($ 8,000) = $ 8,800
CURRENT YEAR: 90% ($12,000) = $10,800
BECNHMARK TO BE MET IS $8,800 (The lesser of two)
Because the appropriate benchmark was met ($9,000 > $8,800), you will NOT incur in an
underpayment of estimated taxes penalty.
FINALLY, while it is true that you may still incur in underpayment of estimated taxes penalty DESPITE HAVING A REFUND because the payments were NOT MADE ON A TIMELY MANNER, you could use Tax withholdings to avoid underpayment penalties.
If Income Taxes are withheld from wages, said income taxes are considered to be paid evenly throughout the tax year, unless otherwise stated by the taxpayer the taxpayer (Sec. 6654(g)). In other words, make arrangements with your employer to increase your withholdings and/or make additional payments.
By the way, the DUE DATES for Tax Estimated Payments as they apply to Tax Year 2024 are the following:
1. April 15th, 2024
2. June 17th, 2024
3. September 16th, 2024, and
4. January 15th, 2025
About Form W-4, Employee's Withholding Certificate
W-4 Calculator 2024
Tax Withholding Estimator
Underpayment of Estimated Tax by Individuals Penalty
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