Pay retroactively?

[Heather Jo]

Hi there!

My income is inconsistent, how do I determine how much to pay? I’ve made less this year than last year and I file Jointly with my husband.  I was supposed to pay $1900 quarterly, but I didn’t even make that much for the first or second quarter. 

I haven’t paid any yet, should I pay retroactively? If so, how do I determine how much? Do I include the stubs the IRS provided? 

Thanks!

[RSUMan]

You cannot pay retroactively.  You can make an estimated tax payment and the TurboTax software will determine if an underpayment penalty is owed.

There are two safe harbors you should be aware of:

1. if your spouse has withheld 100% of your 2021 tax liability or
2. together you withhold 90% of your current 2023 tax liability

then, you will not owe an underpayment penalty.

[Heather Jo]

Okay thank you. 

Can you direct me toward the best way to pay moving forward the 2023 year so that I don't incur a penalty for not paying quarterly this year? You mentioned the turbotax software, how do I find this?

Thanks!

[RSUMan]

Our software can be found at turbotax.intuit.com.

The underpayment penalty interview questions are located in the Other Tax Situations section.

The best way to comply is to calculate your profit each month and then go online to IRS.gov/payments and make an estimated payment (I suggest 15.3% of the profit at least to cover the self-employment tax.).

MAKE SURE the estimated payment is being applied to the tax year that you are earning the income in; review closely your entries on the IRS website.

You do not get penalized for not making quarterly payments; the penalty applies if you underpay your tax owed during the course of the year.  So if you lose money the first half of the year in your self-employed business, you do not have an estimated tax obligation for that perio.