Making a one time estimated tax payment

[AnuragI]

Hello,

In order to avoid underpayment penalty at the federal level, I make sure to adjust my W4 to pay 110% of my last years taxes. 

This year however I calculated a bit wrong and turns out I am ~3K short.

Example: Like if my last years federal tax was X dollars, this year I would have paid this year 1.1X - 3K in my W2.

Now this should trigger an underpayment penalty. 

My question:

1. Can I make a one time payment to avoid the underpayment.

2. If yes, what option should I choose on the IRS payment website. 

3. How do I enter that information to turbotax once the payment is done

Thanks

[Opus 17]

It’s not clear why you need to make such delicate adjustments to your W-4 unless you have outside sources of income that you were trying to cover for. Normally, the W-4 is set it and forget it.

In any case, start by making an estimated payment on the IRS website, www.irs.gov/payments. You will select “2021 estimated tax payments” from the reason menu.  Then in TurboTax, you can list the estimated payment in the section titled “estimates and other taxes paid” which is on the page for deductions and credits.

Any payment made by January 15 will be counted as a fourth-quarter payment.  TurboTax may offer to calculate a penalty for you. I would decline this option and wait and see if the IRS bills you.  If they do, they would likely annualize the shortfall and determine that you were $750 underpaid for the first, second, and third quarters. You would not be underpaid for the fourth quarter because of the estimated payment.  The earlier you pay, the less interest you will be charged, and if you pay before December 15, you will be able to avoid the monthly penalty increment that will be charged as of December 15.  If the IRS does send you a bill, and you have never owed a penalty before, you can request a first time penalty waiver. The IRS can’t waive the interest, but the interest will be recalculated once the penalty is removed.

[Carl]

1. Can I make a one time payment to avoid the underpayment.

Yes. But it's no guarantee that you won't avoid an underpayment penalty. It may only reduce it; sometimes quite a bit too.

2. If yes, what option should I choose on the IRS payment website.

For 2021 estimated taxes, the only choice you can make really, is for the 1040-ES 4th quarter payment. The 3rd quarter payment was due on Sept 15th, 2021.

3. How do I enter that information to turbotax once the payment is done

You'll deal with that under the Deductions & Credits tab in the Estimates & Other Taxes Paid section, when you get to that point in the program through the interview process.

[fanfare]

As long as you withheld through 2021 at least the amount of tax you paid for 2020,

there is no under-withholding penalty.

[Opus 17]

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@fanfare wrote:

As long as you withheld through 2021 at least the amount of tax you paid for 2020,

there is no under-withholding penalty.

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There are 3 ways to avoid the penalty.

• Owe less than $1000 at tax time
• Pay into the system at least 90% of the tax you owe this year
• Pay into the system at least 100% of your tax liability from last year (or 110% if your AGI is more than $150,000).