My 2024 Estimated Tax Payments

[kamull01]

Back in 2023, I knew that there was not going to be enough federal withholding from my 2023 pension payments to cover my 2023 federal tax due.  This is because of large interest payments to savings accounts due to high interest rates in 2023.  I had a pretty good idea of what my 2023 total tax due would be and I made a large estimated tax payment in my IRS account in October, 2023 to ensure that there would be enough to cover the 2023 tax due. This was the first time I had ever had to make an estimated tax payment.

 I filed my 2023 1040 via Turbo Tax and it reflected both this 2023 estimated tax payment and the federal tax withheld from my pension distributions.  I ended up with a small refund.  I did not realize that Turbo Tax had prepared  Form 1040ES 1, 2, 3, and 4 and that the amount for a quarterly 2024 estimated payment had been calculated on those forms based on the 2023 taxes due after withholding. There were no dates for the estimated tax payments on these 1040ES forms.  However,  I just discovered that Turbo Tax had also  prepared an “Estimated Tax Payment Options” form with due dates for each of the 1040ES payments, April 15, 2024 being the first due date.

Now, again in 2024, I know that the federal withholding from my 2024 pension payments will not be enough to cover my 2024 federal tax due.  Again, this is because of the high interests rates for the better part of 2024.  I made a large estimated tax payment in June and again in early September 2024 and will make another estimated tax payment  in November 2024 to insure that there will be enough to cover the 2024 tax due.  Each of these payment is (and will be) much more than the figure that is on 2023 Form 1040ES 1, 2, 3, and 4.  My 2024 pension federal withholding plus these 3 2024 estimated tax payments will more than cover the 2024 tax due.

Although the first 2024 estimated tax payment is considerably more than the amount on the 2024 Form 1040ES, this first payment was deposited in my IRS account on June 21, 2024 and not on or before April 15, 2024.

Will there be a penalty because I did not make the first estimated tax payment on/before April 15, 2024, even though the payment is much more than the amount that Turbo Tax calculates on the 2024 Form 1040ES?

[tagteam]

Estimated payments need to be made on a timely basis.

The fact that you might have paid more than what was due in a later quarter does not ameliorate an underpayment in a prior quarter.

[kamull01]

What prompted 2023 Turbo Tax to generate the "Estimated Tax Payment Option for 2024" sheet?  I voluntarily made an estimated tax payment to the IRS in 2023 because I knew that before the 2023 year was over, my pension withholding would not be enough to cover the tax due.   Did having put this 2023-estimated-tax- payment-to-my-IRS-account on the 2023 tax return cause it to generate this "Estimated Tax Payment Option for 2024" sheet for 2024 and the Form 1040ES Estimated Tax Vouchers for 2024 1, 2, 3, and 4?

Does the IRS know that Turbo Tax generated 1040ES Estimated Tax Vouchers for 2024 and does the IRS know that it should expect them?

If there is a penalty for not having filed the 1st 2024 estimated tax payment on time, does Turbo Tax calculate the amount of the penalty?  Or does the IRS?  And do the 2024 estimated tax payments have to be large enough to include this penalty when the tax return is filed to not incur a penalty for underpayment?

What if in 2024 I will have paid enough in withholding to cover my 2024 taxes due?   Would I still be held to making 2024 Estimated tax payments (all of which would come back to me in a tax refund after I filed my tax return)? 

And if in 2025 I will have paid enough in withholding to cover my 2025 taxes due, will I still be held to making 2026 Estimated tax payments?

[SteamTrain]

@kamull01 

1)   Generally speaking, TTX will include new 2024 1040ES forms in the software...IF...based on the taxes being filed for 2023 for ALL your 2023 income, the "Withholding" done for all that income, didn't cover the taxes assessed (probably, just if the balance due amount was more than $1000 ).   This does NOT include any estimated taxes paid during the year in that calculation.   So, based on the just 2023 numbers, you would need the 1040ES forms again. 

(You could change the calculations to use your "expected" 2024 numbers by going thru the  "Form W-4 and Estimated Taxes" interview on the Other Tax Situations page.

2)  The IRS does not know the 2024 1040ES forms were prepared and are not expecting them.

3)  a) If there is an underpayment penalty, and you owe more $$ at tax time that the withholding plus estimated taxes didn't cover everything, then TTX can calculate an estimated penalty, but the TTX number will be close, but may not be exact...because TTX cannot know exactly on what date you will actually pay the extra due.   b)  But, if there is an underpayment penalty and you are getting a refund at the time you file, because you overpaid with some of your estimated tax payments after having missed the first one (it happens), then they just take the penalty out of your Refund.

4)  If you increase your withholding during 2024, such that it covers your taxes due for 2024  (less than $1000 extra due at tax time)   then you can ignore the 1040ES forms.

5) Same for 2025....increased withholding that covers all taxes due allows you to ignore the 1040ES forms (if generated).

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Subtle details though...There is some penalty forgiveness for #4 and #5, as there is also something called a Safe Harbor, whereby if you owe more than $1000 extra at tax time, you may still not have an underpayment penalty if your "withholding" (and/or "timely-paid" estimated taxes ) exceeded the prior year's total assessed taxes by 100% or 110% of the prior year's tax assessed (100% vs 110% depends on total AGI)...or if  90% of the current year's taxes assessed have been paid by either withholding...or "timely-paid" estimated taxes.