1040-ES Estimated Taxes Amount - Incorrect

[maranello1983]

I always have to pay estimated taxes. I have just filed my 2022 taxes and after filing them I realized that for the next year's estimated taxes, TurboTax estimated a very higher figure.

When I open the main screen that shows "track your refund", it tells me next year I will owe $67,000 taxes (which makes sense). But when I open the actual tax return that was transmitted to IRS, I see 1040-ES vouchers have an amount of $21,804 each.  This makes no sense.

Also, I paid the amount that was on the 1040-ES last year, and I ended up overpaying and getting a refund of  $12,600 and last year's amount was $19,760 per payment. 

So I am not sure why it's making me pay more than I need and this year is even more than last year which itself was more than I needed to pay.

[robtm]

TurboTax is not making you pay Estimated Taxes. The tax shown is merely an estimate based on data you entered, you do not have to pay what is shown. You can figure the estimated tax yourself. A good rule of thumb would be to increase your 2022 tax by 10-15%, subtract out tax that would be withheld (e.g. from W-2, etc.) and the balance would be the estimated tax you would pay for 2023. You can download the 1040-ES forms from the IRS.gov website or make the estimated payments directly on their website.

[maranello1983]

I am aware TurboTax isnt forcing me to pay the estimated taxes. I guess my question was mostly around how TurboTax is coming up with those numbers and why they are overstated. 

If I paid excess taxes 2022 tax year (due to excess estimated taxes) and if my income 2023 tax year vs income 2022 tax year will be identical to the dollar (which it is actually identical) then shouldn't I take the estimated taxes I paid towards tax year 2022 subtract my refund amount (excess tax payments) and then divide that amount by 4 and use that as my estimated tax amount?

Basic Algebra:

I made 100x in 2022 and paid 10x estimated taxes. I got 2x tax refund. I will make 100x in 2023 and turbotax is suggesting me to pay 12x estimated taxes this year whereas it should be smart enough and suggest to pay 8x instead (because 10x - 2x = 8x). I guess my question is, am I missing something obvious here? Is it simply because the algorithm is extremely naive that it assumes you will make 10-15% more money each year and increases the 1040-ES amount? Why wouldn't it go off your full tax liability of the previous year minus your payments and if there is a refund then lower the 1040-ES amount for the following year?

OR is it because there is some IRS rule and you have to have certain amount of buffer in these estimated tax payments?

[AliciaP1]

There is no IRS rule for the calculation of estimated taxes.  The goal is to alleviate the underpayment penalty which for 2023 so far is 7-9% and is higher than it was all 2022.  TurboTax assumes you will increase your income since that generally happens and tries to extrapolate the underpayment penalty as well.  You can use the estimated payment vouchers from TurboTax and change the amount you are remitting if you want, or you can easily print a blank Form 1040-ES to submit with your payments.

@maranello1983 

[EbonyA]

Is there something we can help you with regarding this topic? @krich82.