Estimated Payments
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New Member

Estimated Payments

I filed my 2019 income taxes and noticed that I got vouchers for estimated payments for 2020.  I have never had to pay estimated taxes.  Why would I have to now?

5 Replies
Level 7

Estimated Payments

If the amount of taxes withheld from your paycheck during the year was not enough to take care of most of your tax liability, the IRS requires you to make estimated payments so that you will not have a shortage the next year.  Underpayment of taxes can result in fines and interest due.  If TurboTax generated the estimated payment vouchers for 2020, the amount you need to send with each one is already on the voucher.  If you choose not to pay estimated taxes (and it's not too late to do so), have your employer deduct more each month from your paycheck to make up the difference.

Level 2

Estimated Payments

We can suppose some ideas together, but only you or your tax specialist can answer some or most of your question; you did not provide sufficient information to get a really specific answer.

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Basically, the IRS established its estimated-payments system for folks that the IRS believed to be at risk of being unable to pay at tax payment time. Independent contractors are notorious offenders, whereas estimated tax payments for regular hourly or salaried W-2 employees, are withheld by their employer, per IRS rules, at every payday.

 

So it could be that the IRS noticed that you had a "significant" amount of income (I do not know what threshold the IRS might use to flag an amount, or a ratio, to be "significant") that you reported for 2019 that was not reported for 2019 on a W-2 from an employer. Or perhaps the IRS simply noticed that your 2019 payment due at filing was unusually high when compared to folks with steady income who make estimated payments, whether self-employed or W-2 employed.


Clearly, something about your 2019 return flagged the IRS, and now the IRS is hinting, perhaps demanding, that they'd like to see you make estimated payments.

 

I do not know the estimated payment rules (you should look that up yourself); however, I am pretty sure that if you're "supposed to" make estimated payments, but then at tax filing time you do not owe (or get a refund), then you're not going to be hassled by the IRS for not making estimated payments if you were "supposed to".

 

When I was self-employed, I paid myself through the same payroll service used for my employees, so that I did not have to cough up my own quarterly withholding through estimated payments. That smoothed out the cash flow and avoided the extra effort to do the estimated payments.

 

New Member

Estimated Payments

Thanks.  But that doesn't help me understand.  All of my income and taxes are accounted for on my W2 and I didn't owe any money.  I got a refund.

Level 3

Estimated Payments

No worries.  TT often attached the vouchers in case your situation changes for this year.  I have often had them attached to my file when I have received a refund. 

Level 2

Estimated Payments

If all of your income & withheld taxes were reported to the IRS, and filed by you with a W-2, and you qualified for a refund, then the implication is that some other entity has made an error about your need to make estimated payments that are in addition to those which are being withheld by your employer.

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