What if I think the estimated payments for next year are too high?

It's your tax return, scratch out the amount due each quarter and write in what you want on the 1040-ES.

The IRS doesn't have a copy of those forms and won't until you file them quarterly.

TurboTax creates these forms as an aid to you, to ensure that you don't get hit by an underpayment of estimated tax penalty. But since your income and tax situation can change each year, you are perfectly free to change the amounts and pay whatever you think is appropriate.

for 2020 I owe taxes but slightly under 10% of my taxable amount (so likely no penalty), but for 2021 Turbotax is estimating quarterly payments of over $4000, but I only owe $2000 in 2020.  So why is Turbotax calculating I need to pay twice the amount that I under paid in 2020?     or how is it calculating what my 2021 estimated payments should be?  (What does it know I don't.... 🙂 

 

I suggest you go back and double check what you entered in the estimated tax section.  This is what calculates your 1040-ES.

 

In TurboTax please follow these steps:

1. After opening the return select FEDERAL
2. Choose Other Tax Situations
3. Scroll down to Other Tax Forms
4. Select Show More
5. Scroll to Form W-4 and Estimated Taxes
6. Follow the steps from there

There is also an Online version that can be reached at: TurboTax Tax Estimator

 

The underpayment penalty may apply if :

• The amount of tax you paid during the tax year is less than 90% of the tax that you owed for the current year. 
  • Example:  in 2020 you had $8,500 withheld in taxes.  Your 2020 tax return shows that you owe $10,000.  That is less than 90% and there will be a penalty.
• The amount you paid during the tax year didn’t at least equal 100% of your taxes owed the prior year. 
  • Example:  Your 2019 tax return showed that you had $9,000 as a total tax obligation.  You paid $9,001 in withholdings in 2020.  Your 2020 tax bill comes in at $20,000.  There is no penalty because you paid 100% of the 2019 tax.
• The IRS also says you can probably avoid the penalty if the amount you owe is less than $1,000, after subtracting withholdings and refundable credits.

The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily.