underpayment penalty

in 2022 my federal tax due was 4100$, I had paid more withheld and actually received a refund

Now in 2023, I am doing a Roth conversion which will result in 18k taxes due

I had about 7k taxes withheld on pension payments throughout 2023

If I don't pay any taxes until filing return in 2024, will I have a penalty?

I believe that since I paid more taxes in 2023 as I owed in 2022, a penalty does not apply, even so the taxes due will be significant (18k) ?

I am also filing NY state taxes, what are the rules in NY for penalties?

418

Level 15

Nov 13, 2023 7:25:13 AM

General rule:

You must pay estimated tax for 2023 if both of the following apply.

You expect to owe at least $1,000 in tax for 2023 after subtracting your withholding and tax credits.
You expect your withholding and tax credits to be less than the smaller of:
1. 90% of the tax to be shown on your 2023 tax return, or
2. 100% of the tax shown on your 2022 tax return. Your 2022 tax return must cover all 12 months.

Note: If your AGI for 2022 was more than $150,000 ($75,000 if your filing status for 2022 is married filing a separate return), substitute 110% for 100%

Level 4

Nov 14, 2023 4:05:01 AM

thanks tagteam... I want to make sure I understand this correctly..

- I will owe much more than 1000 in taxes

- 90% of taxes for 2023 will be very high, more than 16k

- the 2022 taxes paid was 4100

- 4100 is smaller than 16k,

- my current 2023 withholding of 7k is NOT less than 4100

- so I don't have to pay estimated taxes in 2023

But does that then also mean if my owed taxes is 18k for 2023, that I will NOT have to pay a penalty for underpayment?

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underpayment penalty