Calculating Estimated Tax payments

kelster2 · ‎April 26, 2025

I took a sizable distribution from my traditional IRA ($374,000) during 1Q25. I did not have taxes taken out as they will be paid from my brokerage account.

In 2024, I paid $65,531 in federal taxes ( including $1713 NIT). Am I safe paying quarterly estimated taxes that equal 110% of my 2024 tax due ( $72,084 =$18,021 quarterly) I am 64, husband 68 so this is not an early withdrawal nor is it an RMD issue.

We have small social security, rental and farm income so not looking for a 'final' answer, just want to keep my nose clean and avoid a penalty relating to the IRA distribution. We ended up with a refund in both federal and state in 2024.

Thanks

baldietax

yes to avoid underpayment penalty you either need "as you go" thru the year via withholding or timely ES payments, the smaller of - 100% of your 2024 tax (110% if AGI > 150k which sounds like your case), or 90% of your 2025 tax. Presumably you've already done the math that 110% of 2024 tax is less than 90% of your 2025 estimated tax. With caveat I'm not a CPA, and I don't know if there is anything unusual about your situation, but from what I understand on this topic you'll always meet safe harbor paying ES based on 2024 tax, especially if you expect a large income increase for 2025, provided you pay the ES timely every quarter and evenly. Everything is known, so you don't need to worry about fluctuations in your estimate or the timing of these income events during the year. This is also the default method TT uses to generate ES vouchers based on 2024 tax and withholding, unless you provide estimates for 2025 under Other Tax Situations / Form W-4 and Estimated Taxes; as an extra check you can try going thru this interview section and you should see TT continuing to recommend ES based on 2024.

This FAQ is helpful https://www.irs.gov/faqs/estimated-tax

and the instructions for Form 2210 for any other caveats for high income but I think it's just using 110% of 2024 instead of 100%

https://www.irs.gov/instructions/i2210#en_US_2024_publink1000305514

View solution in original post

baldietax

yes to avoid underpayment penalty you either need "as you go" thru the year via withholding or timely ES payments, the smaller of - 100% of your 2024 tax (110% if AGI > 150k which sounds like your case), or 90% of your 2025 tax. Presumably you've already done the math that 110% of 2024 tax is less than 90% of your 2025 estimated tax. With caveat I'm not a CPA, and I don't know if there is anything unusual about your situation, but from what I understand on this topic you'll always meet safe harbor paying ES based on 2024 tax, especially if you expect a large income increase for 2025, provided you pay the ES timely every quarter and evenly. Everything is known, so you don't need to worry about fluctuations in your estimate or the timing of these income events during the year. This is also the default method TT uses to generate ES vouchers based on 2024 tax and withholding, unless you provide estimates for 2025 under Other Tax Situations / Form W-4 and Estimated Taxes; as an extra check you can try going thru this interview section and you should see TT continuing to recommend ES based on 2024.

This FAQ is helpful https://www.irs.gov/faqs/estimated-tax

and the instructions for Form 2210 for any other caveats for high income but I think it's just using 110% of 2024 instead of 100%

https://www.irs.gov/instructions/i2210#en_US_2024_publink1000305514