I left my jot in April. My income will be 1/3 less than last year. Do I still need to pay the Tax Estimate Voucher from the 2020 tax return? Or what is the best way to estimate if I will be owing tax or not in 2021?
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You can ignore them. The estimated payments are optional to pay. They are estimates for next year. Turbo Tax doesn't want you to owe next year. They might have printed out if you got a one time large income this year. Like if you took a IRA or 401K distribution. They DO NOT get sent to the IRS or state with your return.
Did you owe a lot for 2020? Are you a W2 employee or a 1099NEC independent contractor?
I was a W2 employee. I owed about 12k in 2020, so I got 4 vouchers of 3k each for 2021
@LL213 Are/did you receive unemployment? Many taxpayers owed tax in 2019 and 2020 after losing their job because they received unemployment and did not have tax withheld.
Unemployment is taxable for federal income tax purposes and is taxed by some states. Last year (2020) the first $10,200 of unemployment was exempt from federal tax under certain conditions. At this time, that tax break is not in effect for 2021.
You can use TurboTax's free TaxCaster app to estimate whether you will owe tax or get a refund. The calculator has not been updated for 2021, but it still quite accurate.
No, I don't have unemployment. I am getting deferred comp distribution in the next 24 months. For 2021, my total gross income can be 2/3 of 2020.
There's not enough information to tell you whether you need to make estimated tax payments. A tax accountant would need to know more information including you expected income and withholding amounts, any other income, marital status, dependents, etc.
In general, the IRS wants you to make estimated tax payments if you expect to owe $1,000 or more when you file your return. See Estimated Taxes.
TaxCaster can estimate your refund/amount due and see whether you expect to owe $1,000 or more. However your 2020 estimated tax vouchers are based on your 2020 income so they would not be correct.
It's best to speak with a tax accountant,
Thanks, this is helpful. I have used the Estimator to check and it seems I may not owe IRS in 2021. But in case I do, and I didn't pay the estimate tax now, will it cause more panelty?
The penalty is a rolling penalty, meaning you are charged for every quarter that you are short. It's possible to get a refund, but still owe a penalty. For example, you sold a house in January for a big profit and waited until December to make estimated payments. The IRS would assess a penalty for unpaid tax from January to November because you are supposed to pay as you go.
Penalty Waiver and First Time Abatement
You can request a penalty waiver in the Underpayment Penalty section of TurboTax if:
TurboTax removes the penalty on your return. If the IRS rejects your waiver, they will send you a bill.
Topic No. 306 Penalty for Underpayment of Estimated Tax
You can also ask for first time penalty abatement after receiving a bill: Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver
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