Can TurboTax to calculate Estimated Tax Payments that Vary by Due Date?

[bosso3]

I usually make a withdrawal from the IRA at the end of the year, with the amount varying on my current financial needs and some other factors. IRA withdrawals add to Adjusted Gross Income, which in turn adds into the formula that determines whether -- and how much -- federal tax I will have to pay on my Social Security benefits. In my case it can make a big difference. (SS and any IRA withdrawals I make are the bulk of my income.)

Since TurboTax helps prepare Estimated Tax Payments and vouchers, this is a product question.
I do not see a way to use TurboTax to calculate Estimated Tax Payments that vary by due date. Does such an option exist?
If so, how does one access it, and can it generate the Estimated Tax Payment Forms 1040-ES, that also vary by due date?

For additional info see:
https://ttlc.intuit.com/community/forums/replypage/board-id/209/message-id/224405

[AmyC]

1. Yes but you must come back into the program through the year.

2. Yes, go through the estimated payments section to update your income and amounts already paid to get a new estimate for each voucher.

The IRS also has vouchers and calculators. Form 1040-ES, Estimated Tax for Individuals with calculators in the instructions and you can vary amounts. 

Go to IRS.gov/Account to make payments

[bosso3]

Thank you for your reply.  I still have questions.

I am discussing how to use TurboTax to calculate my 2025 Estimated Tax Payments.

Regarding TurboTax, I found no way to enter my  2025 income by Quarter, only annual or annualized amounts.  If TurboTax has a way to enter my income by Quarter, please point me to where I can do so.

Let me restate my situation using hypothetical numbers.

W-2 Wages = Zero

Dividends and interest and the like, say $1,000 per month

Social Security say $3,000 per month.

Taxable IRA Distribution - Maybe $5,000, maybe $40,000, maybe lots more if I decide to buy a car or house, in November.

(Aside:  I think the question is the same regardless of the source of the November income, as long as it is a taxable source - eg: Lottery winnings.)

One issue is that the November income is unknown before Q4, and that income also impacts the tax on the Social Security payments already received earlier in the year.

I know I could estimate or guess at the maximum November payment to be received, but then I'd likely be instructed to significantly overpay the Estimated Tax Payments for Q1, Q2 and Q3, with money that I have not yet received.

Yet, if I send Estimated Tax Payments only based upon what I actually receive in Q1, Q2 and Q3, TurboTax says I owe a late payment penalty.  (I ran a test, using Forms 2210 & 2210-AI.)  The penalty varies depending upon the size of the November payments and the size of  the Social Security payments.

I understand that if I knew the taxable amount I will receive in November, I could spread the payments over Q1, Q2 and Q3.  But, if I don't know the size of the November taxable payment, I end up with a late payment penalty. 

(Is it possible that the TurboTax calculation of Forms 2210 & 2210-AI calculate the late payment penalty incorrectly in this case?  The IRS says that tax payments  are required on a "pay as you go" basis.  Getting a penalty because November income was much larger than previous quarters' income is contrary to that statement. 

Or is it possible that the IRS Forms 2210 & 2210-AI don't comply with the regulations and laws?  [Gasp!])

I hope this better explains my dilemma and my question.

Any help is appreciated.

----------------------------------------------------

Regarding the IRS link you provided, Form 1040-ES, Estimated Tax for Individuals - This has a link to calculate W-4 Withholding but I am not talking about W-4 withholding, I am talking about Quarterly Estimated Tax Payments.   I saw no link to a Quarterly Estimated Tax Payment Calculator.  If there is such a link, please provide it.

(I did see forms 2210 & 2210-AI, but these are not calculating forms, they only accept the numbers you  type in.)

----------------------------------------------------

Lastly, If I pay estimated taxes based upon actual Q1, Q2, & Q3 income, is there a way to send an explanation or contest the calculated penalty?

[RobertB4444]

When calculating your estimated payments the system uses annualized income.  The IRS taxes you based on income for the year and not for each quarter and feels like you should pay it as you go.

HOWEVER

When calculating whether you owe a penalty with your tax return then the system allows you to enter your income by period in order to explain why you sent your estimates in the way that you did.  So you can remove any penalty incurred when you file your tax return by entering your quarterly income at that point.

In order to be sure to avoid penalties altogether you should annualize your expected income and make the payments in advance.  I understand your reluctance to do so because of the unpredictable November payment.  But that is the safest way.  (If the November payment is very small you can reduce or eliminate the 4th quarter payment in this instance).

The most economical way is to make the first three quarterly payments based on what you are 100% certain that you will receive during the year and then the 4th quarter payment based on what you receive in November.  Then, when doing your tax return, you will need to enter your income into the penalty reduction part of TurboTax which directly fills out al of the information on the 2210.  This will reduce your penalty - although it may not eliminate it (the IRS calculations are notably weird) - and explain why your 4th quarter payment is much larger.

@bosso3 

[bosso3]

@RobertB4444 Thank you for your reply and advice, which is clear and understood.

 A the end of the last sentence of your reply you say

 "and  explain why your 4th quarter payment is much larger." 

 I presume the purpose of that is to request a waiver of the late payment penalty.  

Where and how do I do that in TurboTax?

[VolvoGirl]

@bosso3   I  have the Windows Desktop program.   If you are using the Online version you might consider switching to the Desktop program.  Desktop has more forms and features.   I open my current return several times during the year to update my income and recalculate the estimates for the next year.   You can update the income you got or estimating and enter how much estimates you already paid so it will figure  the remaining quarterly payments.   I use the What-If worksheet and the Estimated Tax Payment Options sheet.  And sheets for my state.

[bosso3]

@VolvoGirl thank you for your comments.  

I also have the desktop Deluxe version. 

I make a copy of my file to work with, so I don't accidentally mess up my original.

You said: "I use the What-If worksheet and the Estimated Tax Payment Options sheet. And sheets for my state."

How do I find these sheets?

   @RobertB4444

[VolvoGirl]

Good idea to save a copy to test in and make estimates.  I save a copy too.

Go to Forms Mode, click Forms in the upper right or on the left for Mac. Then click Open Forms box in the top of the column on the left. Open the US listing of forms and towards the bottom find the What-if worksheet. It's right under Estimated Taxes.

Or try…Go into Forms View. Once there, at the top of the left column, click on the icon for "Open Form". A popup window will appear. In the text line, type the word "what" without quotes. You should see "what-if worksheet" appear as a selection choice. Double-click it to launch the form.

[bosso3]

@RobertB4444  You previously answered my question with the comment

 "and  explain why your 4th quarter payment is much larger." 

 I presume the purpose of that is to request a waiver of the late payment penalty.  

Where and how do I do that in TurboTax?

You did not respond.  Please advise where in TurboTax I can input my explanation.

[bosso3]

If I have a penalty for Underpayment of Estimated Taxes because of a large November income that made previously received untaxed Social Security Benefits taxable, can I file Form 843  (Claim for Refund and Request for Abatement)  to request a refund of the penalty?

I'm thinking this could work, or is there a different form I must use?

I think I would check the first box under Penalty (Abatement or refund of a penalty or addition to tax due to reasonable cause or other reason allowed under the law)

and explain why the estimated taxes for Q1 changed because of events in Q4.

Do you agree?

@VolvoGirl

[VolvoGirl]

If you get a penalty on 1040 line 38, you might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.

How to add form 2210 for Underpayment Penalty
https://ttlc.intuit.com/community/tax-payments/help/how-do-i-add-form-2210/00/25703

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[bosso3]

@VolvoGirlthank you for your reply.

I have already completed forms 2210 & 2210-AI, and still end up with a penalty, due to the large Q4 IRA withdrawal, which significantly increased the taxable amounts of my Q1, Q2, and Q3 Social Security Benefits received.

Given this, my question was:

"can I file Form 843 (Claim for Refund and Request for Abatement) to request a refund of the penalty?

I'm thinking this could work, or is there a different form I must use?

On From 843. I think I would check the first box under Penalty (Abatement or refund of a penalty or addition to tax due to reasonable cause or other reason allowed under the law)

and explain why the estimated taxes for Q1 changed because of events in Q4."

Do you agree?