2016 Estimated Tax too high for projected income

[mfrank]

When I used TurboTax to complete my 2015 tax returns, it calculated my 2016 estimated tax due. The first time through it asked if I wanted to calculate manually, and I skipped it thinking it would let me revisit this step, but it never did.  I plan to retire int he middle of this year so my income this year will be much less than last year, so I think the estimated tax included in my 2015 return is too high and I will end up overpaying and getting a big refund which I do not want. Do I have to pay the amount TurboTax included on my return, or can I pay a lower amount that should avoid a big refund next year. I pay estimated taxes because I own an S Corp and usually have some non-salary earnings to be taxed, but this year I do not expect to have any.

[maglib · Accepted solution]

You can choose to pay any estimated taxes you want.  You can go back through that section of the interview by just typing estimated taxes in the search field and letting TT recalculate them based on what you truly expect to happen.  Make sure next year, you input exactly the amounts you actually paid though...  

Underpayment of Estimated Tax

If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, 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. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you had a tax liability for the prior year, you may have to pay estimated tax for the current year. See the worksheet in Form 1040-ES (PDF) for more details on who must pay estimated tax.

Who Does Not Have To Pay Estimated Tax

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 (PDF) with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.

You do not have to pay estimated tax for the current year if you meet all three of the following conditions.

• You had no tax liability for the prior year
• You were a U.S. citizen or resident for the whole year
• Your prior tax year covered a 12 month period

You had no tax liability for the prior year if your total tax was zero or you did not have to file an income tax return. For additional information on how to figure your estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax.

Estimated tax requirements are different for farmers and fishermen. Publication 505, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rule

[mfrank]

Thanks for an informative and thorough answer.

[maglib]

you are welcome. Thank you for responding.  Have a great year.