Estimated Taxes

Forum|Forum|6 years ago
May 19, 2020
2 replies
37 views

In 2019 I withdrew money from my 401K to finance a home remodel and Turbo Tax listed estimated tax vouchers to be paid this year (2020) because my income was higher and I was required to pay additional state taxes. In 2020 my income will be considerably less. Should I still pay estimated California taxes during 2020?

hbl3973

Alumni - Champ

If your income for 2020 has returned to the same or lower levels as you had prior to 2019, then you would not need to make estimated tax payments this year if you hadn't needed to in those previous years.

Estimated tax payments are needed when a sizable portion of your income is not taxed at the source, unlike W-2 wages. This additional income often takes the form of dividends and interest and stock and bond sales.

Full details of federal estimated tax are given in IRS publication 505

https://www.irs.gov/pub/irs-pdf/p505.pdf

In addition, states that collect income tax have estimated tax requirements.

DawnC

Employee Tax Expert

We'll automatically include four quarterly 1040-ES vouchers with your printout if you didn't withhold or pay enough tax this year. We do this to head off a possible underpayment penalty on next year's taxes. Same goes for state estimated taxes.

You may get these vouchers if you're self-employed or had an uncharacteristic spike in your income this year. For example, you sold stock or took a large distribution from your retirement plan.

You're not required to make estimated tax payments; we're just suggesting it based on the info in your return. If you feel they're not needed for next year's taxes, you can shred them.