@mitchden1 wrote:
The IRS page for Estimated Payments says "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."
Since I received a refund for 2021 tax return, based on the last part of the above sentence, I don't think I would be charged a penalty if I wait until I file my 2022 return and pay then. Is that correct? If they would charge a penalty, how would they calculate the penalty?
No, that's not correct. It doesn't mean 100% of the payment that was due with your 2021 tax return. It means 100% of the total tax on your 2021 tax return: line 24 on your 2021 Form 1040. To avoid a penalty, the total of your withholding and estimated tax payments for 2022 has to be at least 100% of the amount on your 2021 Form 1040 line 24. If your 2021 AGI (Form 1040 line 11) is more than $150,000 ($75,000 if married filing separately for 2022) you have to pay 110% of your 2021 tax.
The penalty calculation is very complicated. It's based on the amount of your underpayment and when you should have paid it. They will assume that you received your income evenly over the course of the year unless you fill out a special form with your 2022 tax return.
