I'm paying estimated taxes this year...

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SoDakJeff
Posts: 81
Joined: Mon Mar 13, 2017 11:48 am

I'm paying estimated taxes this year...

Post by SoDakJeff » Thu Mar 28, 2019 12:45 pm

I went to an accountant for my 2018 taxes, due to an inheritance last year that involved a farm sale. I've used TurboTax for years, but with figuring out the cost basis on the farmland and a few other oddball things with my finances, I didn't want to mess around with TT and end up getting things wrong. I have to pay a fairly high tax bill due by 4/15, and my accountant set me up with estimated taxes for the remainder of this year. A couple questions:

1. Are the estimated taxes a requirement for the year following a large tax bill?
2. My taxes should be much more straightforward this year. Can I go back to using TT for 2019, or do I need to continue with the estimated taxes?
3. What are the estimated taxes going to do to our current W-4 for my spouse's job? I keep a pretty detailed spreadsheet of my pension and my spouse's paycheck, and I plan to check with the IRS Withholding calculator after our next paydays, bit if I'm paying $1000/quarter in est. taxes and my spouse has income tax deducted from her paycheck, aren't we going to overpay quite a bit?

Thanks.

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WoodSpinner
Posts: 1012
Joined: Mon Feb 27, 2017 1:15 pm

Re: I'm paying estimated taxes this year...

Post by WoodSpinner » Thu Mar 28, 2019 2:03 pm

Did you discuss this with the Tax Preparer?

quantAndHold
Posts: 3560
Joined: Thu Sep 17, 2015 10:39 pm

Re: I'm paying estimated taxes this year...

Post by quantAndHold » Thu Mar 28, 2019 2:25 pm

1. No. If the reason you had such a high tax bill went away, then you don’t have to pay estimated taxes this year. Basically, you figure out how much tax you think you will owe for the year, and how much will be withheld, and the difference is the amount of estimated taxes you will need to pay. A lot of working age people wih regular jobs will solve the estimated tax problem by having extra withheld from their paycheck instead.

2. Whether or not you pay estimated taxes and whether or not you use TT to do your taxes in 2019 are unrelated. TT can handle estimated taxes as well as your accountant.

3. The purpose of the estimated taxes would be to pay tax on non-paycheck income. If you don’t have any of that income anymore and your W-4 withholding is correct, then you don’t need to pay estimated taxes. If you have income from other sources, say farm or investment income, you may need to pay estimated taxes.

And yes, these are good questions to ask your tax preparer.

FactualFran
Posts: 978
Joined: Sat Feb 21, 2015 2:29 pm

Re: I'm paying estimated taxes this year...

Post by FactualFran » Thu Mar 28, 2019 2:26 pm

No, estimated taxes are not a requirement for the year following a large tax. In general, to avoid underpayment penalties your withholding and timely estimated tax payments need to be at least the smaller of:

1. 90% of your income tax for the current year, or
2. 100% of your income tax for the previous year; 110% if your Adjusted Gross Income for 2017 was more than $150,000 ($75,000 if your 2017 filing status is married filing separately). Your tax return for the previous year must cover a 12-month period.

Yes ,you can go back to doing your own tax return.

If you have a sufficiently reliable estimate of what your income tax will be on your 2019 return, then set your withholding so that the total withholding during 2019 is at least 90% of that reliable estimate. Adjusted the amount withheld during the year if the estimate of your income tax for 2019 changes during the year.

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CAsage
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Joined: Sun Mar 27, 2016 6:25 pm

Re: I'm paying estimated taxes this year...

Post by CAsage » Thu Mar 28, 2019 2:29 pm

SoDakJeff wrote:
Thu Mar 28, 2019 12:45 pm
1. Are the estimated taxes a requirement for the year following a large tax bill?
2. My taxes should be much more straightforward this year. Can I go back to using TT for 2019, or do I need to continue with the estimated taxes?
3. What are the estimated taxes going to do to our current W-4 for my spouse's job? I keep a pretty detailed spreadsheet of my pension and my spouse's paycheck, and I plan to check with the IRS Withholding calculator after our next paydays, bit if I'm paying $1000/quarter in est. taxes and my spouse has income tax deducted from her paycheck, aren't we going to overpay quite a bit?
1) No.
2) Definitely model (using any tax software) as accurately as you can what your 2019 taxes owed will be. You can use TT, or Excel, or paper....
3) Once you have finished (2), and determine your other withholding total for 2019 (spouse job and pension), then you can determine whether you need to pay extra. If your total tax liability is covered by withholding, by no means pay any more estimated taxes! It's been my experience paid tax preparers just take the current year and use it to do estimated taxes - you can do better.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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