No W2 Income for Next Year - How Do You Adjust The 1040-ES Payment Voucher Calculation?

[trhao]

Turbo calculates four(4) 1040-ES payments with 'vouchers'. This is a calculation based on current (last years) W2 withholdings to get a user within 100% of last years total taxes to be within safe harbor from penalties.

But what if you retire or plan to retire? Your W2 withholdings may be dramatically reduced from what was used in calculating the estimated payment vouchers. To be in safe harbor do you need to re-calculate the estimated payments to be equal with what your W2 withholdings would have been?

E.g. if based on last years return, Turbo estimates you need to pay $18,000 in total taxes to be in safe harbor. It expects say $10,000 in W2 withholdings. You  will need $8,000 in est payments (4 payments @ $2k/ea) and prints out 4 vouchers at $2k. ea. But you retire on Jan 1. No W2 income or withholdings. You plan to make up for that lost income with say investment or rental income or social security or something. To be in safe harbor do you now have to make 4 estimated payments of $4,500 each for a total of $18,000?

Thanks

[JulieS]

Yes, you can create estimated vouchers based on your projected income for 2024, rather than your actual income from 2023. 

Here's how to do that:

1. Sign in to your TurboTax account.
2. If you already filed your return, select Add State to get back into your return.
3. Select Other Tax Situations.
4. Expand Other Tax Forms and find Form W-4 and Estimated Taxes, select Start or Revisit to the right.
5. Answer No to the question Do you want to change your W-4 withholdings for 2024?
6. Select Review Now on the next screen.
7. Answer the questions about your 2024 filing status, expected income, and deductions.
8. On the screen titled, Which Method? Select one of the 2024 options, not the first option.
9. When you come to the Print Vouchers? screen, answer Yes and the program will include your 2024 1040-ES payment vouchers when you print a copy of your return.