Can I estimate taxes using paycheck?

[mellynlee]

We have usually paid our estimated taxes by calculating 110% of the previous year's taxes, and making sure we pay that same amount. However, last year we sold a large amount of stock, and therefore owe a lot of taxes for 2024. So to try to avoid penalties for 2025, I want to try to pay at least 90% of this year's taxes. Can I do this by looking at our paycheck?

The idea was to add the RSU + Salary on 3/31/25 paycheck, and calculate 35% of this amount. Compare it to the YTD Fed Income Tax paid, and if income tax paid is less, make an estimated tax payment of the difference.  

Is this an acceptable way of estimating taxes?

Do I need to account for the "Employer HSA Contribution" or "Group Term Life" which is also listed under the Earnings portion of the paycheck?

We always receive 1099-s for interest and dividends as well...should I add the amount received by 3/31 to the above salary+RSU amount? Or can I wait until the end of the year to add the yearly amounts?

Most all of our income is from this paycheck, which is a salary and RSU stock vested quarterly. The company takes out 22% of the stock for taxes, but we are in a higher tax bracket. We usually take the standard deduction. 

Or if there is an easier way to calculate this in TT, let me know.

[JohnB5677]

There are some flaws in your process.

• The easiest way to do this is to allow TurboTax to make the calculation. 
• You can exclude the stock sale from it, but include the 1099 income.

You can prepare estimated taxes for next year.

Start on the left sidebar menu

1. Under Federal
2. Select Other tax situations
3. On the center drop down select Form W-4 and Estimated Taxes
4. Adjust How Much Tax You Pay - No
5. Estimated Taxes for 2025 - Prepare Now
6. Continue the interview.

TurboTax can calculate next year's federal estimated taxes?

Also see the IRS Website Make a payment

[mellynlee]

Thank you for your suggestion. However, I'm not sure how I can estimate my future RSU income. I have no idea how much RSU income will be added each quarter when it vests, as the stock is volatile. So, on the first page where it asks me to estimate our Wages, I cannot give a good estimate since the wages is equal to Salary + RSU.

How do I account for the RSU income using TurboTax to find my estimated taxes?

[fanfare]

", as the stock is volatile."

in this case, you are back where you started.

You are stuck with the prior year's tax rule, which is unfortunately ( or maybe not)  going to be high.

[fanfare]

each quarter your withholding and estimated tax paid must be at least 25% of the Required Annual Payment, even if your income is uneven,

[mellynlee]

I know for sure that our last year's income will be MUCH higher than this year's income. So, I definitely don't want to use the 110% of last year's tax method.

Can you explain the flaws of my method from my original post?

From the 3/31 paycheck, if I add my salary + income from RSUs, I get a number. If I take 35% of this number, I find it is much higher than the Fed Income Tax that has been withheld YTD.

I would estimate that I can pay this difference as my 4/15 estimated tax.

Can I then do the same with my 5/31 paycheck?

What am I missing in these equations?

Thank you!