Maryland Form PV (Personal Tax Payment Vouchers)

[m-kutza]

Maryland Form PV (Personal Tax Payment Vouchers) print out each year for us, but we have ignored these for years assuming they were "suggested payments" for the upcoming year (we pay what's due for the current filing tax year via direct debit). Never had a problem. My son had the same forms print out last year and ignored them too. However, in January he received a bill from Maryland with penalties and interest from not making the 4 payments. So are the payments mandatory, or just suggestions? I'm so confused.

[MindyB · Accepted solution]

Maryland Form PV is required if your employer isn't already taking enough out of your paycheck. Under the state’s "pay-as-you-go" rules, you are required to pay your taxes throughout the year as you earn your income, rather than in one lump sum when you file your tax return. If your job withholds at least 90% of your total tax bill (or 110% of what you owed last year), then those vouchers are optional and you can ignore them. However, if your son did not have enough withholding or had investment income where no taxes were being taken out, Maryland expects quarterly payments. Once he owed more than $500 at the end of the year, the state charged him interest and penalties.

The vouchers that TurboTax automatically prints are based on this past year- you should adjust them if your income changes.

[dmertz]

The amounts on the estimated tax payment vouchers is considered to be estimated based on the assumption that income and tax withholding will remain the same from year to year.  However, the need to make estimated tax payments is based on actual income and tax withholding.  Failure to timely pay an amount to satisfy one of the underpayment safe-harbors results in an underpayment penalty.  When tax withholding is insufficient, estimated tax payments are needed to make up the difference, although the amount necessary might be different that what TurboTax estimated..

Maryland tax payments follow essentially the same rules as federal tax payments described here:

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

[m-kutza]

This seems almost illegal to me. What if you have your employer begin additional state withholdings during 2026? Or what if you move out of state during 2026? Would you still have to pay the 2026 quarterly estimated tax amounts to avoid penalties and fees? Or can you appeal that with the state of Maryland?

[SusanY1 · Accepted solution]

As Mindy mentioned above, if you are aware that your holding obligations are handled via other means, such as withholding through your employer, you can safely ignore the vouchers.  This also applies if you no longer have income subject to Maryland tax.  

[dmertz]

TurboTax calculates the necessary estimated tax payments based on the assumption that tax withholding and, for state tax, state of residence will be unchanged and income will not decrease from one year to the next.  If those assumptions are correct, the estimated tax payment vouchers produced by TurboTax show the minimum quarterly amounts the must be paid to qualify for the the safe harbor of paying 110% of last year's Maryland tax liability.

In your son's case, the penalty and interest imposed by Maryland indicates that his tax withholding was insufficient to qualify for the safe harbor of paying at least 110% of the previous year's tax liability, for the safe harbor of tax withholding totaling at least 90% of the current-year tax liability or for the safe harbor of having a balance due of $500 or less.

To avoid the need to make state estimated tax payments in the future, he likely needs to have his employer increase his state tax withholding.