Estimated taxes

[hfradkin]

When do you get penalized for not paying enough estimated taxes if your income increases from 2022 to 2023?

Can I avoid this by paying more estimated taxes before the end of the year?

[TeriH]

There are "safe harbor" rules for estimated tax payments.  The IRS will not charge you an underpayment penalty if: You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or. You owe less than $1,000 in tax after subtracting withholdings and credits.

[emina]

Hello, thanks for joining us today!

Generally, if you owe less than $1,000, you do not have to pay quarterly estimated tax payments and will not see an estimated tax penalty. If you pay at least 90% of your tax obligation or 100% of the tax owed in the prior year (whichever is smaller), then you will not be penalized. If you are a high-income taxpayer, with an AGI over $150,000, then the 100% is increased to 110%.

If you are a w2 employee, you may try adjusting your w-4 and increase your withholding for the rest of the year.

You may find detailed information here: https://www.irs.gov/taxtopics/tc306

[JanD9]

There can be a penalty for underpaying taxes.  There are a couple of ways to avoid this penalty:

• Owing less than $1000 in tax after subtracting withholding and refundable credits
• If the amount of withholding and estimated tax paid is at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.
  • For example, if your tax liability was $3000 in 2022 and will be $5000 in 2023, total payments will need to total at least $3000  

                 100% of prior year = $3000    90% of current year = $4500   smaller amount is $3000

To increase 2023 payments, you can update your W-4 withholding and/or make an estimated payment to the IRS .