This is my first time filing for an extension. I have paid estimated taxes quarterly and the total paid is more than my tax liability for last year (2022). So no penalty for under-estimating even if I owe, IF I FILE BY APRIL 15. If I file for an extension, and need to pay more than I did in estimated taxes once I file my return, will there be a penalty? TT Deluxe asks for my 2023 estimated tax liability, not my 2022 actual tax owed.
if you used Turbotax online last year your 2022 liability would have been transferred provided you're using the same online account or if you're using a desktop computer that contains the .tax2022 file. The 2023 underpayment of estimated tax penalty is based on your 2022 liability
there is an underestimated tax penalty for not having enough withheld or paid in on estimates. there is another penalty for late payments.
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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. unless you can show otherwise 25% of you annual withholding is assume to occur in each quarter.
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.
form 2210 page 3
https://www.irs.gov/pub/irs-pdf/f2210.pdf
state laws vary
Filing for an extension only gives you an extra six months to file the tax return, it does not give you an extension to pay any taxes owed.
Taxes owed for a tax year 2023 return have to be paid on or before April 15, 2024 to avoid a failure to pay penalty.
don't confuse the "failure to estimate enough" penalty with the "failure to pay in full on time" penalty.
If your quarterly withholding and estimates in 2023 are at least 100% / 4 = 25% ( 110% / 4 for certain high income taxpayers) of your 2022 tax, there will be no penalty on your 2023 tax return, regardless of any jump in income.
if you used Turbotax online last year your 2022 liability would have been transferred provided you're using the same online account or if you're using a desktop computer that contains the .tax2022 file. The 2023 underpayment of estimated tax penalty is based on your 2022 liability
there is an underestimated tax penalty for not having enough withheld or paid in on estimates. there is another penalty for late payments.
*********************************
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. unless you can show otherwise 25% of you annual withholding is assume to occur in each quarter.
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.
form 2210 page 3
https://www.irs.gov/pub/irs-pdf/f2210.pdf
state laws vary
If by the regular due date of your tax return you have paid at least 90% of the tax liability eventually shown on your tax return filed under extension and you pay the remainder when you file, the IRS treats this as reasonable cause to waive the penalty. See the instructions for Form 4868.