1099 and I pay Quarterly ES taxes.

[Jennifer A]

This year I have taken out more  IRA distributions than last year.  I am a REALTOR and income is less and expenses will be less.

I assume I will owe more in taxes.  I am under the impression that I pay a penalty to IRS if my estimated quarterly payments are not enough.   Is this correct?

Should I plan to make an additional ES payment to IRS in December no penalty?

[MarianneK]

Hello Jennifer!

Great question!!   Being self employed and making estimated payments is a balancing act.   Always try to keep what you owe under $1000 to avoid penalty.   

Since I don't know your whole tax situation, let me give some examples.   

Let me first assume you are of age to take the IRA distribution and there is no penalty.   I would advise to have federal and any applicable state taxes withheld on the 1099-R.   I would still calculate your estimated net income and potential taxes owed and make that 4th estimated tax payment, due Jan 15, 2024.   It's possible your lower Realtor income may allow you to make a lesser estimated payment provided enough tax was withheld on the IRA distribution.   

If your IRA distribution was subject to a 10% penalty, hopefully you had the 10% withheld plus the applicable federal and/or state taxes.  

In either case, I would still look at your income for the year and make the estimated payment.   That will help make sure you do not have to pay any penalty.   

Here is a nice article for your review.   Estimated Taxes: How to Determine What to Pay and When