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posted Nov 29, 2023 8:37:04 PM

estimate tax payments

Can I make a one-time estimate tax payment on an unexpected end of year income without any IRS penalties if my withholding would have covered my expected income throughout the year? How can I g

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3 Replies
Level 15
Nov 29, 2023 9:08:19 PM

Sure. This IRS article gives you all the information. 

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

 

Level 15
Nov 29, 2023 9:54:38 PM

@pilot17 yes you can but there is are catches.

There will be no federal penalties for not paying in enough taxes during the year if withholding
1) and timely estimated tax payments equal or exceed 90% of your 2023 tax or
2) and timely estimated tax payments equal or exceed 100% of your 2022 tax (110% if your 2022 adjusted gross income was more than $150K) or
3) the balance due after subtracting taxes withheld from 90% of your 2023 tax is less than $1,000 or
4) your total taxes are less than $1,000

the lower of 1 or 2 is your required annual income tax payments. 1 is difficult to know until the year end so generally option 2 is the safer option. Under the simplified method 25% of the estimate taxes must be paid in each quarter by 4/18, 6/15, 9/15 and 1/15/24. 25% of you annual withholding is assume to occur in each period but you can specify actual withholding for each period.

failing this and being subject to penalties you can use the annualized installment income method.
this method requires knowing your income and deductions thru 3/31, then 5/31, then 8/31, and finally tear end which should be the same as the tax return. the income is annualized. taxes are computed on the annualized income and then de- annualized. your tax payments for each period must equal or exceed these amounts to avoid penalties.

if you can increase withholding to meet any exception then paying the estimates is not required.

 

Level 15
Nov 30, 2023 4:47:07 AM

Yes, but if you do not meet the requirement for the safe-harbor based on your 2022 tax liability you will probably have to annualize income on Schedule AI of Form 2210 to avoid having penalties for the earlier quarters of the year.