Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
marcysurles6403
Level 1

Does payment of estimated tax. as recommended by TurboTax, guarantee that I will not be subject to a penalty for underwithholding?

 
1 Best answer

Accepted Solutions
DianeC958
Expert Alumni

Does payment of estimated tax. as recommended by TurboTax, guarantee that I will not be subject to a penalty for underwithholding?

Yes, if the information you put into TurboTax for your income and other withholding is accurate.

 

The safest option to avoid an underpayment penalty is to aim for "100 percent of your previous year's taxes." If your previous year's adjusted gross income was more than $150,000 (or $75,000 for those who are married and filing separate returns last year), you will have to pay in 110 percent of your previous year's taxes to satisfy the "safe-harbor" requirement. If you satisfy either test, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return.

 

If you expect your income this year to be less than last year and you don't want to pay more taxes than you think you will owe at year end, you can choose to pay 90 percent of your estimated current year tax bill. If the total of your estimated payments and withholding add up to less than 90 percent of what you owe, you may face an underpayment penalty. So you may want to avoid cutting your payments too close to the 90 percent mark to give yourself a little safety net.

 

If you expect your income this year to be more than your income last year and you don't want to end up owing any taxes when you file your return, try to make enough estimated tax payments to pay 100 percent of your current year income tax liability.

 

Estimated Taxes: How to Determine What to Pay and When

 

@marcysurles6403

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

1 Reply
DianeC958
Expert Alumni

Does payment of estimated tax. as recommended by TurboTax, guarantee that I will not be subject to a penalty for underwithholding?

Yes, if the information you put into TurboTax for your income and other withholding is accurate.

 

The safest option to avoid an underpayment penalty is to aim for "100 percent of your previous year's taxes." If your previous year's adjusted gross income was more than $150,000 (or $75,000 for those who are married and filing separate returns last year), you will have to pay in 110 percent of your previous year's taxes to satisfy the "safe-harbor" requirement. If you satisfy either test, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return.

 

If you expect your income this year to be less than last year and you don't want to pay more taxes than you think you will owe at year end, you can choose to pay 90 percent of your estimated current year tax bill. If the total of your estimated payments and withholding add up to less than 90 percent of what you owe, you may face an underpayment penalty. So you may want to avoid cutting your payments too close to the 90 percent mark to give yourself a little safety net.

 

If you expect your income this year to be more than your income last year and you don't want to end up owing any taxes when you file your return, try to make enough estimated tax payments to pay 100 percent of your current year income tax liability.

 

Estimated Taxes: How to Determine What to Pay and When

 

@marcysurles6403

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Dynamic AdsDynamic Ads
Privacy Settings
v