@billyandwilla wrote:
Thank you for the reply!
Now that I can type more than 150 characters, I can be a little more specific.
I'm all good on the age penalty portion. (And I can attest to that every morning when I hear the snap-crackle-pop getting out of bed!)
My wife and I will gross in the neighborhood of $478,000 in 2021. This is SIGNIFICANTLY more than ever before due to taking money out of my 457(b) for a home remodel.
What gets subtracted from our gross? (Property taxes, charitable contributions, child care, etc...)
And is that number our "adjusted gross income"?
If not, then what is my "agi"?
Is our tax bracket determined by our agi?
Somewhere in the past, I was told that if one is "waaay" short on income tax via normal withholdings, there is a large penalty in addition to taxes due.
In addition to the 20% mandatory withholding, we're only taking out "normal" withholdings on our regular paychecks. Is there anything else we can do to mitigate how much we owe come tax time?
Is there indeed a penalty if I come up "waaay" short?
Thanks in advance for the help!
I would use the IRS withholding calculator
https://www.irs.gov/individuals/tax-withholding-estimator
or the turbotax TaxCaster app (it may still be programmed for 2020 rules but the result will be similar to 2021TaxCaster tax calculator
or start a test return in Turbotax online (it's "free to start" and you only pay when you are ready to file, or start a test return in the desktop version of Turbotax for 2021 installed on your own computer.
You can be assessed a penalty for under-payment of withholding due to the lump sum that increases your income and tax owed. To avoid a penalty, you need to pay into the system (via estimated payments or withholding) at least 110% of your tax liability from last year. That's form 1040 line 24. Remember that your tax liability is the overall amount you paid to the IRS last year. If you had $10,000 of withholding and got a $1000 refund, your liability was $9000. Likewise if you paid $8000 via withholding and owed another $1000, your tax liability was $9000.
You can make an estimated payment at www.irs.gov/payments, select 2021 Estimated Taxes from the reason menu.
