What is the logic behind the estimation of taxes that will be withheld next year. My current withholding seems sufficient to cover the required payment over the course of the year but I can't figure out how the software comes up with the number it uses to predict how much I will withhold.
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Without access to the code working to do the calculation, my assumption is that the Federal withholding tables are being used to estimate your future amount that will be withheld.
Here are a couple of resources you might want to review for further information:
Publication 15-T (2022), Federal Income Tax Withholding Methods
TT knows what my income was for 2021 and it knows how much was withheld in 2021. It does not know how much I plan to have withheld in 2022 and there is no option for me to articulate the plan. So using a standard withholding table is of no value at all from what I can tell.
If TT shows that I will get a refund then why would it plan huge estimated tax payments that are unnecessary. Is there someplace where I have accidentally provided erroneous data or is it making unjustified assumptions. I recognize that it only does add, subtract, multiply and divide with no thought at all. So it can't be that hard.
Yes, TurboTax usually uses the most recent information (2021) when calculating your 2022 estimated taxes. Generally, taxpayers have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed
and:
* Your taxes withheld don't cover at least 90% of your 2021 tax liability, or
* Your taxes withheld aren't at least 100% of your 2020 tax liability if your AGI is up to $150,000 or 110% if your AGI is more than $150,000. (The amount is $75,000 if you're married filing separately.)
Depending on what your AGI is expected to be, you may be responsible for estimated tax payments for up to 110% of your estimated tax liability.
TurboTax allows you to estimate your 2022 income and deductions in order to calculate and adjust estimated tax payments, if necessary.
Please follow these steps to calculate and generate new 1040-ES vouchers:
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