Underpayment Penalty

[MiaManu]

I won $50K in a casino drawing in 2024. They did not take out taxes. Do I need to pay taxes now to keep from owing a penalty for underpayment?

[Opus 17]

Yes.  By default, the IRS considers income to be evenly earned throughout the year, even if it is not. So for a ump sum of income paid between January 1 and March 31, 2024, you can either:

Make an estimated tax payment by April 15

or

Split up your estimated payment into 4 installments and pay them before April 15, June 15, September 15, and January 15 next year.

Depending on your other income, your total estimated payment is likely to be about $12,500.  If you over-pay, you will get the difference back as part of your refund.

And don't forget you probably need to make state estimated payments, too. 

[JohnB5677]

Yes, you would be wise to make the estimated payments.

Open Tax Tools

1. On the drop-down select Tools
2. There will be 4 green boxes
3. Select Topics Search
4. Type the Estimated taxes paid for next year
5. The first screen will be Enter Your 2024 W-2 Wage Information
6. Answer the questions and enter amount.
7. You will come to Enter 2024 Other Income
8. Follow the interview and enter income & deductions.
9. You will come to Other Income
10. Put the $50K in here.

TurboTax will guide you through the mailing process for your 1040-ES estimated payments.

Or you can setup an account and pat directly to the IRS Direct Pay With Bank Account