2024 Estimated Taxes

[kamull01]

I am concerned that I might have to pay a penalty for having missed the 1st 2024 estimated tax payment, because I did not see that Turbo Tax had calculated quarterly payments for me.  For the 2nd estimated payment,  I  paid more than 5 times the amount on the voucher to my IRS account.  For the 3rd voucher I paid more than 3 times the estimated payment, and for 4th voucher I will pay more than 3 times the the amount on the voucher. These payments will more than cover the tax due.  Will I have to pay a penalty for missing the 1st payment?  If so, how can I figure out how much it is?

[marctu]

This is a difficult question to fully answer.   The estimated tax vouchers if paid on time generally allow you to avoid the imposition of an estimated tax penalty.  

The estimated tax penalty is calculated  based on the tax shown on your original return or on a more recent return that you filed on or before the due date. The tax shown on the return is your total tax minus your total refundable credits.

The IRS calculates the penalty based on:

• The amount of the underpayment
• The period when the underpayment was due and underpaid
• The interest rate for underpayments that is published quarterly

The IRS will not charge you an underpayment penalty if:  You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year (110 percent for AGIs greater than $75,000 for single and separate filers and $150,000 for married filing joint), you most likely will not need to make estimated tax payments.), or you owe less than $1,000 in tax after subtracting withholdings and credits.

While you overpaid by three and five times more in the second, third and will in the fourth quarter, you may still owe a penalty.  If your income can be annualized, I would do that as well to reduce any penalty.     Once the 2024 Turbo Tax is available you can go into Other Tax Situations and calculate the penalty.  

Thank you for the opportunity to answer your questions @kamull01 

All the best,

Marc T.

TurboTax Live Tax Expert

[dev145]

Hello kamull01,

It is very had to tell if you will have underpayment penalty or not. Please note penalty is calculated based on several factors i.e.  total tax liability for the year, final  balance due, total payments. 

From IRS website:

"You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less."

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!

[JandKit]

Hi Kamull01,

If I may add my advise to the others befor me,

there is a safe harbor that allows for an exception to the Estimated Tax Penalty:

Safe Harbor Rule: 

Generally, you can avoid the penalty if you pay at least 90% of the tax for the current year or 100% of the tax shown on your return for the prior year, whichever is smaller.

Plainly speaking, if you pay more than the tax liability for the past tax year or more than 90% of the tax liability for the current year, the penalty can be excluded. If your are fortunate enough to be in the higher tax range with income exceeding $150K, the exclusion is effective if 110% of the past year's tax liability is paid.

Goodluck!

[kamull01]

I paid more than the tax liability for the past tax year 2023.  In fact, I got a tax refund.  As for 2024, by the time all of the estimated tax payments for 2024 are made, I will have paid more than my 2024 tax liability.  I have made quarterly payments for June (late by 5 days)  and September  (and  will do it in November), but missed the 1st quarter completely.   And I increased the 2nd quarter payment to make up for the missed 1st quarter.  By the time all of the 2024 estimated tax payments are made (June, September, Dec), the tax payments plus the pension withholding will be 122% of my 2023 tax liability.  So, I know that I will not incur a penalty for underpayment.

My question is about having missed the 1st quarterly payment deadline completely and having made the 2nd quarterly payment about 5 days later than the deadline,  but making it large enough to include the missed 1st quarterly payment, and having made the 3rd and 4th quarterly payments on time.  Is there going to be a penalty for missing the 1st payment deadline completely, and having missed the 2nd quarterly payment by 5 days.  As I said, the total of all of the payments will be 122% of my 2023 tax liability.

[kamull01]

and if there is going to be a penalty for missing the two deadlines (the 1st one one completely and the 2nd one by 5 days),  how do I calculate what the penalty is?

[kamull01]

I don't see any advice from anyone before you.   If there are others, where are they?

[DoninGA]

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@kamull01 wrote:

I don't see any advice from anyone before you.   If there are others, where are they?

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Scroll up to the top of this thread and then you will see answers from @marctu @dev145 and @JandKit 

[kamull01]

In 2024 Turbo Tax, there is a section called "Other Tax Situations"?   Where do I find this in 2024 Turbo Tax (based on where it is in 2023 Turbo Tax).

[kamull01]

Regarding " If your income can be annualized, I would do that as well to reduce any penalty. "  How do I go about annualizing my income?  My income has not been evenly distributed throughout the year.  A major chunk of it will come in December.  Does Turbo Tax have a section for annualizing income?

[kamull01]

Sorry, I do see now some advice from others before you.  This interactive chat/messaging is a bit hard to follow.

Will all of these replies be available to view after this event is over?

[marctu]

So to answer both of the questions that you just asked.   While 2024 has not come out, and will not until sometime in November, it would be found as follows:

1. Choose Federal

2.  Choose Other Tax Situations

3.  Choose Additional Tax Payments

4.  Choose Underpayment Penalties.

You can also use the "Jump to" and search for Underpayment Penalties.

In the Underpayment Penalties, you would choose "Yes" to the question "Do you want to review the estimated taxes topic?"  This is where you would annualize your income. 

Since you have a good amount of 4th quarter income, when you annualize any penalty would be significantly less.  

Thank you for the opportunity to answer your questions @kamull01 

All the best,

Marc T.

TurboTax Live Tax Expert