I want to verify that I am calculating my estimated tax payments correctly. I originally tried to use the TurboTax (online) version to do this for me, but found it way too complicated. My main objective is to avoid the underpayment tax penalty (which we owed for the last 2 years - 21 and 22).
I believe we will have a higher AGI this year than last year, so I am going to assume we can just pay 110% of last year's taxes owed, in order to avoid the penalty.
This is how I'm figuring it out:
I multiply last year's tax owed (1040, line 24) by 110% to get an amount owed next year.
Call this number X.
I have our 3/31/23 paycheck stub. From this, I look at the YTD Federal Income Tax withheld, and I multiply this number by 4. (I'm assuming it will be about the same each quarter, AND I do NOT have to include the Employee Medicare and SS Employee Tax amounts??) Call this number Y.
Now, X - Y = amount I have "underpaid"
I take this amount and divide it by 4, and then I can pay this amount as my estimated tax payments each quarter.
If I do this, then we will avoid the underpayment penalty next year. EVEN if we end up selling stock, and will owe taxes on that stock, we still won't have an underpayment penalty.
Is this correct, or am I missing something else?
