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Layne7
New Member

Do I have to pay estimated taxes if my income was larger than expected for prior year?

for 2020, my company got aquired by a larger firm so I was given some money as an employee.  However it was a one time deal.  My income for 2021 will be smaller than what it was at the ending of 2020.  It will be about the same as 2019.  Do I still have to pay estimated taxes??
3 Replies
DawnC
Expert Alumni

Do I have to pay estimated taxes if my income was larger than expected for prior year?

No, you are not required to pay estimated taxes, especially if you do not think you will owe income tax.   We'll automatically include four quarterly 1040-ES vouchers with your printout if you didn't withhold or pay enough tax this year.  We do this to head off a possible underpayment penalty on next year's taxes.

 

You may get these vouchers if you're self-employed or had an uncharacteristic spike in your income this year (like you described above).  For example, you sold stock or took a large distribution from your retirement plan.

 

You're not required to make estimated tax payments; we're just suggesting it based on the info in your return.  If you feel they're not needed for next year's taxes, you can shred them.

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Layne7
New Member

Do I have to pay estimated taxes if my income was larger than expected for prior year?

Hi Dawn

Ok...thanks for the info.

Here's another question.  For 2021, now I may incur larger income due to liquidation of some stock.  My income wont be as large as it was for 2020.  I suspect it will be 1/2 of the increase that I had for 2020.  I was wondering if I use the estimated tax stubs but may be only the 1st and 2nd payment vouchers, would that be ok?  My 4 vouchers equate to about 10K but I was thinking of using 2 of the vouchers to pay 5K.  Does this create a bigger problem? 

 

 

 

npierson7
Level 1

Do I have to pay estimated taxes if my income was larger than expected for prior year?

It won't create any problems at all, since that approximate amounts anyway. If you want to use two of the four estimate vouchers, you might spread the payment and use the first and the last ones. 

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