Quarterly taxes and lower income

[No103]

I had a great income level at my job in 2022--so much so that I ended up owing and need to pay quarterly taxes this year. 

Unfortunately, I was laid off in January and my income will be substantially less. (Still not working.) Those quarterly payments are big. Is there a way to "rebalance" this given that my income will likely be half or less of what I made last year?  

[VolvoGirl]

Yes.  You could even ignore them and not pay them.  They are optional.

To prepare or edit estimates for next year you need to be in your current return. But be careful not to change anything in your actual return.

In TurboTax Online, sign in to your account.
Select Tax Home in the left menu.
Scroll down to Your tax returns & documents.
Select 2022, and then select Add a State (you're not actually adding a state, this just gets you back into your return so you can make changes).

Search by typing in W4. Hit the Enter or Return key to get the Jump to w4 link to show up. Go to the W4 page and it will ask if you want to Change your W4. Click on NO. The next page will start the Estimates.

[Holly W]

Hello No103, 

Thank you for joining us today!  We're so happy you are here!  I am sorry to hear about you being laid off.  You can always adjust your Estimated Tax Payments quarterly based on the income you received in that quarter.  With that being said, if you had a payment plan with the IRS for that balance due, that is a different program.  Are you self employed and that is why you are making estimated tax payments?  Are you collecting Unemployment since your were laid off?  If so, are you having taxes withheld?  With a few more details on your situation, I feel I will be able to give you a more detailed answer.  I am happy to answer any other questions you might have.  Thanks again for joining us today, and please let me know if I can clarify any of my answers for you.

[No103]

Hi  Holly, 

Thanks for your response. I did owe about $1300 (super mega tech company seems to have missed something in the withholding) I paid that prior to April 15, as well as the first quarterly payment because I was able to do so. But $1100 for each remaining quarter seems harsh when the only income I have is unemployment and that small amount already has withholding. 

[Holly W · Accepted solution]

Thank you for clarifying, since you are already having taxes withheld from your Unemployment, estimated taxes may not be necessary at this point, unless something changes in the future, but theoretically, If you have a W2 job, they should be withholding the appropriate amount based off of your W4 and estimated payments wouldn't be needed.  It never hurts to use the TurboTax Tax Caster to see where you might be:  https://turbotax.intuit.com/tax-tools/ That way you can make any adjustments if need be. 🙂 

[No103]

Thank you so much for this! If I just “don’t pay,” are there ramifications? Do I need to notify the IRS or anything? 

[VolvoGirl]

Nope.  The IRS won't be expecting estimates.  Just remember to enter any payments you made into your 2023 return to get credit for them.  

[Holly W]

Hello No103, 

There would only be a ramification if you owe 1,000 or more, then there  might be a penalty for not paying estimated taxes.

[Holly W · Accepted solution]

Also, you do not need to alert the IRS.