Estimated Taxes with New Job

[Mochina]

I assist my son in filing his taxes using Turbotax. For his 2023 returns, he was a full-time student who had additional income from a part-time job and a few financial accounts.  In the past,  because of investment income, he made estimated tax payments. But for 2023, he received refunds on his federal and state returns, primarily due to education credits. He is finishing graduate school soon and will start a full-time job during the last week in June. He is single with no dependents. We need help in determining what estimated taxes, if any, he should pay beginning in June. How would you recommend we go about determining this and making the necessary calculations?  Can we use Turbotax to help?  

[NCperson]

use the IRS withholding estimator

https://www.irs.gov/individuals/tax-withholding-estimator

alternatively, estimate his income using this website and it will indicate how much tax is due. 

https://www.dinkytown.net/java/1040-tax-calculator.html

[Opus 17]

You could use turbotax online, the program is "free to start" and you won't pay unless you need to actually file a return. Remember this is a 2023 tax program, although there are currently only minor changes expected for 2024.  

You can also use this site at the IRS.  

https://www.irs.gov/individuals/tax-withholding-estimator

However, the IRS estimator is going to work best if you wait until after he gets his first paycheck in July.  The estimator will take into account the wages, the job withholding, and any other income and credits, and will tell him if he is on track to owe or get a refund, and then you can either make an estimated payment or change his withholding to cover the taxes. 

[Mochina]

My son now has received the first paycheck of his new job. I went to the IRS Tax Withholding Estimator. I entered the federal tax withheld from my son's earlier part-time job, and the federal tax withheld from his first paycheck from the new full-time job. It gave me the correct taxable income before credits and the correct income tax before credits. But when I entered a Lifetime Learning credit of $1215 (the same that he got in 2023), for some reason, the Estimator did not take it into account. The estimator noted "You have not entered any tax credits." in the recap of information entered. The final result was the following, and it did not make any sense:

Expected tax withholding

$0

Anticipated tax obligation*

$2,078

Projected amount owed

$0

Do you have any advice on how to fix the problem?  

[Opus 17]

"Do you have any advice on how to fix the problem?  "

No, I haven't used that tool recently and I can't guess at all the facts you entered.  Be aware the lifetime learning credit is 20% of tuition up to $10,000 (up to $2000 of credit), but can't be more than the tax liability.  I would run the estimator without trying to enter the LLC, and see what his tax liability (obligation) is expected to be, and then consider the LLC separately, manually.  For example, if his obligation is $2078, then his LLC will be 20% of tuition up to the maximum of $2000 (meaning, if he pays more than $10,000 of tuition, he would get the max LLC of $2000 and his net tax owed would be $78.  Or if he pays $5000 of tuition, he would get a $1000 credit and owe $1078 in taxes, that needs to be covered by withholding and/or estimated payments.)

The tool may also work a bit better after the second or third paycheck, since it needs to extrapolate the whole year from the income and taxes to date, and if you can give it a few more weeks of data, it may be more accurate.  

[Mochina]

Thanks--we will try your approach.