Stop Paying Estimated Taxes

[hughbarrett2006]

I’ve paid estimated taxes the last few years, mainly to avoid larger tax bills come tax time, but also to help counter significant stock market gains. Our typical annual income is $400k+, but I expect it will be closer to $300k for 2020. My employer pays taxes for me in addition to extra with holdings I ask for at the state and federal level.

Question: Can I stop paying estimated taxes without facing a penalty?

[Texas Roger]

Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

This is for federal taxes. If you are asking about state, I don't know the answer. 

[tagteam · Accepted solution]

---

@hughbarrett2006 wrote:

Question: Can I stop paying estimated taxes without facing a penalty?

---

You can avoid the underpayment of estimated tax penalty if:

1) You owe less than $1,000 in tax, after subtracting any withholding and refundable credits, OR

2) You paid withholding and estimated tax of at least 90% of the tax for the current year or 100% (this can increase to 110% based on adjusted gross income) of the tax shown on your return for the prior year, whichever is smaller.

See https://www.irs.gov/taxtopics/tc306

[Anonymous]

for them since their 2019 adjusted gross income was over $150,000 as one of the options they would need to pay in 110% of their 2019 taxes not 100%

it is also entirely possible that with $300,000 in short-term capital gains for 2020 they could end up owing more than if they had $400,000 in long-term capital gains for the same year.

within the TT program for 2019, there should be a section where they can enter their estimated 2020 amounts to get a better idea of where they stand.   some taxpayers like to owe as much as possible without penalties, others prefer to break even and there are those who want to get a huge refund - that's how they save for a vacation or large purchase - let the IRS hold their money interest free.