Estimated Taxes

[bronsta9]

Hello and thanks in advance!

I've recently retired and have questions regarding "estimated taxes"...

Which of the following do I need to pay "QUARTERLY" estimated taxes for:

- interest from bank accounts

- interest from savings bonds

- dividends & capital gains (ETFs, throughout the year)

- dividends & capital gains (mutual funds, year end)

- Trad IRA to Roth IRA conversions

- Annuity income

I'm not sure if I need to:

a) make estimated tax payments -- are they even required

b) if estimated tax payments are required, when are due -- do I need to make payments in the quarter the various types of income are paid to me

c) are there certain estimated taxes that I can pay once per year (ie in December)

Thank you for any help/insight you may be able to provide!

[bluedeb · Accepted solution]

Generally, you must make estimated tax payments for the current tax year if both of the following apply: You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits. The following has information about estimated taxes, 

You may owe estimated taxes if you receive income that isn't subject to withholding, such as:

• Interest income
• Dividends
• Gains from sales of stock or other assets
• Earnings from a business
• Alimony that is taxable

Do I need to pay estimated taxes?

This depends on your situation. The rule is that you must pay your taxes as you go throughout the year through withholding or making estimated tax payments.

If at filing time, you have not paid enough income taxes through withholding or quarterly estimated payments, you may have to pay a penalty for underpayment.

To determine whether you need to make quarterly estimates, answer these questions:

1. Will you owe less than $1,000 in taxes for the tax year after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year? If so, you're safe—you don't need to make estimated tax payments.
2. Do you expect your federal income tax withholding to amount to at least 90 percent of the total tax that you will owe for this tax year? If so, then you're in the clear, and you don't need to make estimated tax payments.
3. Do you expect that your income tax withholding will be at least 100 percent of the total tax on your previous year's return? Or, if your adjusted gross income (2022 Form 1040, line 11) on your tax return was over $150,000 ($75,000 if you're married and file separately), do you expect that your income tax withholding will be at least 110 percent of the total tax for the previous year? If so, then you're not required to make estimated tax payments.

If you answered "no" to all of these questions, you must make estimated tax payments using Form 1040-ES.

To avoid a penalty, your total tax payments (estimated taxes plus withholding) during the year must satisfy one of the requirements we just covered.

[karenhall]

Can you pay your estimated taxes (voucher 1) with the tax you owe for you 2022 taxes owed when you file on line with the tax return? In other words, can I combine these payments or do they have to be done separately.

[DoninGA]

---

@karenhall wrote:

Can you pay your estimated taxes (voucher 1) with the tax you owe for you 2022 taxes owed when you file on line with the tax return? In other words, can I combine these payments or do they have to be done separately.

---

---

@karenhall wrote:

Can you pay your estimated taxes (voucher 1) with the tax you owe for you 2022 taxes owed when you file on line with the tax return? In other words, can I combine these payments or do they have to be done separately.

---

Taxes owed and estimated tax payments for 2023 are separate and have to paid separately

[anonymouse1]

Thank you, I was coming here to ask why TT was filling out estimated tax vouchers for 2023, I discovered them when I switched to Forms view to review 2022 taxes before filing.  TT is estimating that we will owe more than $1000 for 2023, based on 2022 withholding.  Thing is, we're getting a refund for 2022.  My husband changed jobs in 2022 and had excess SS withheld, which helped so he had enough withheld to cover my Roth conversion.  But projecting 2023 income (he has 18 paychecks left), unless we do some huge conversions this year, or I get my pension check(s) for the last quarter and OPM doesn't withhold at least 22% (who knows, as long as they are taking to process retirement claims, I am not really expecting any money until 2024, when I'll likely get a big check to cover the last 3 months of 2023, then start monthly benefits), our tax bill will actually be LESS (because of changes in brackets and standard deduction) in 2023 than in 2022.  I hate to make estimated payments, or have our 2022 refund applied to 2023, that's just making the IRS even more of an interest-free loan from money withheld in 2022.  Do we *have* to file estimated taxes?  I assume that if our taxes are covered by what is withheld in 2023, the IRS can't penalize us for not paying estimated taxes even if 2022 withholding (line 25a) wasn't enough to cover 110% of 2022 taxes (line 24) minus the $1000 AOTC on line 29, but not counting the excess SS tax on line 31?  We are planning on claiming the AOTC again in 2023.  I'm not sure if the IRS will see the vouchers or worksheet from TT that show we should be making estimated tax payments.  And I can't change the numbers that TT is putting in the Estimated Tax Options worksheet, to put in an estimate of the 2023 tax, or estimated 2023 withholding.

[BrittanyS]

No, you do not have to make the estimated tax payments.  The estimated tax payment vouchers are just an estimate based on your 2022 return.  If you know your 2023 tax year will be different, and taxes will be less, then you do not need to make the estimated tax payments.  

Remember, the rule is that you must pay your taxes throughout the year through withholding or making estimated tax payments.

If, at filing time, you have not paid enough income taxes through withholding or quarterly estimated payments, you may have to pay the penalty for underpayment.

For more information, see the link below:

Estimated Taxes

@anonymouse1 

[anonymouse1]

Thanks, from what I've seen, the 22% tax bracket for MFJ in 2023 the tax would be $10294 plus 22% of the excess over $89450, with a $27700 standard deduction.  If I don't get my pension in 2023, our income might be about $3000 higher than it was in 2022, but because of the increase in the standard deduction (by $1800) and the adjustments in the tax brackets, bringing the bottom of the 22% bracket to $89450 instead of $83551, I estimate that our tax (with the same $2500 AOTC and $500 dependent credits) will be $376 LESS than in 2022, and withholding is slated to be more (except for the excess SS withheld, but our refund in 2022 is actually $500 more than that excess anyway).  So this may be counting our chickens before they're hatched, but I'm figuring without any unexpected income or large conversions, we should be getting a refund of about $2000 next year - I sure don't want to pay estimated taxes and get over $3000 back!