Estimated taxes

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Chemtrails
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Joined: Wed Aug 25, 2021 10:29 am

Estimated taxes

Post by Chemtrails »

Hello all,

I believe I’m going to run into an issue where the dividend income from my non-retirement accounts (market accounts) is large enough that I will have to pay estimated taxes. I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point. I am married. I file my taxes annually as married filing jointly. Should I also file the estimated taxes as married filing jointly? Thanks so much guys and gals.
MrJedi
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Re: Estimated taxes

Post by MrJedi »

Do you meet a tax safe harbor through your withholding? 90/100% of this year's tax or 100/110% of last year's tax?
FoolMeOnce
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Joined: Mon Apr 24, 2017 11:16 am

Re: Estimated taxes

Post by FoolMeOnce »

You can do estimate taxes. You can also request a dollar amount of extra withholding from each paycheck on your W4.
nolesrule
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Re: Estimated taxes

Post by nolesrule »

Chemtrails wrote: Thu Jan 13, 2022 7:29 am I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point.
What exactly does this mean?

And are you asking about 2021 or 2022 and forward?
little_star
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Re: Estimated taxes

Post by little_star »

If you are asking about 2021, you should first verify if you have achieved safe harbor (i.e., already paid 110% of last year's taxes (if AGI greater than $150k), or 90% of this year's taxes).

If you are asking about 2022, I second (third?) the recommendation that you achieve safe harbor through additional withholdings, which you can specify as dollar amounts on your W4. The advantage of this is that withholdings are automatically considered to be "timely", so you can easily adjust the amount if it turns out that you are not quite at the safe harbor level at the end of the year. You are also less likely to forget to make a payment, since it is coming out of your paycheck.
lstone19
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Joined: Fri Nov 03, 2017 3:33 pm

Re: Estimated taxes

Post by lstone19 »

Chemtrails wrote: Thu Jan 13, 2022 7:29 am Hello all,

I believe I’m going to run into an issue where the dividend income from my non-retirement accounts (market accounts) is large enough that I will have to pay estimated taxes. I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point. I am married. I file my taxes annually as married filing jointly. Should I also file the estimated taxes as married filing jointly?
Making estimated payments is simply sending money. There is no filing status, such married filing jointly, involved. You send money, either by sending a check with a voucher or by on-line payment, but you do not file 1040-ES or otherwise show your work. 1040-ES is simply a worksheet for your records if you choose to use it.
MarkNYC
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Re: Estimated taxes

Post by MarkNYC »

lstone19 wrote: Thu Jan 13, 2022 9:41 am
Making estimated payments is simply sending money. There is no filing status, such married filing jointly, involved. You send money, either by sending a check with a voucher or by on-line payment, but you do not file 1040-ES or otherwise show your work. 1040-ES is simply a worksheet for your records if you choose to use it.
That's not quite correct. The IRS makes numerous references to "joint estimated payments" in the 1040-ES instructions and IRS publications. When making an estimated payment by check, the IRS instructs that it must be accompanied by a payment voucher from Form 1040-ES, and if that payment is a "joint estimated payment" that both spouses names and SSNs be listed on the voucher in the same order as will be listed on the joint tax return.

The reason joint estimates might matter is a situation where the spouses end up filing separately. If filing separate returns, each spouse can take credit for their own separate payments. Joint estimated payments can be allocated in any manner the spouses agree on, but if they can't agree, such as in a divorce situation, then the IRS has a required method for allocation based on each spouse's respective income.

So joint estimated tax payments do exist and in some situations can be relevant.
Last edited by MarkNYC on Thu Jan 13, 2022 11:12 am, edited 1 time in total.
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eye.surgeon
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Re: Estimated taxes

Post by eye.surgeon »

My wife and I file jointly and I make quarterly estimated tax payments at the federal and California level jointly.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett
lstone19
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Re: Estimated taxes

Post by lstone19 »

MarkNYC wrote: Thu Jan 13, 2022 11:05 am
lstone19 wrote: Thu Jan 13, 2022 9:41 am
Making estimated payments is simply sending money. There is no filing status, such married filing jointly, involved. You send money, either by sending a check with a voucher or by on-line payment, but you do not file 1040-ES or otherwise show your work. 1040-ES is simply a worksheet for your records if you choose to use it.
That's not quite correct. The IRS makes numerous references to "joint estimated payments" in the 1040-ES instructions and IRS publications. When making an estimated payment by check, the IRS instructs that it must be accompanied by a payment voucher from Form 1040-ES, and if that payment is a "joint estimated payment" that both spouses names and SSNs be listed on the voucher in the same order as will be listed on the joint tax return.

The reason joint estimates might matter is a situation where the spouses end up filing separately. If filing separate returns, each spouse can take credit for their own separate payments. Joint estimated payments can be allocated in any manner the spouses agree on, but if they can't agree, such as in a divorce situation, then the IRS has a required method for allocation based on each spouse's respective income.

So joint estimated tax payments do exist and in some situations can be relevant.
Valid point. But I was taking the way the OP wrote it to mean he had to "show his work" so was asking if he should declare MFJ on the 1040-ES. Your comment is more about how the payment to the tax account is credited. Maybe it's a matter of language. To me, you "make" estimated payments but you don't "file" anything (yes, there's a voucher but that's just to insure proper crediting). So I was thinking the OP thought he had to "show his work" to justify the payment amount. The IRS does not care how you determine how much to pay, just that you make timely payments, all to be reconciled on your 1040.
Topic Author
Chemtrails
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Joined: Wed Aug 25, 2021 10:29 am

Re: Estimated taxes

Post by Chemtrails »

Thanks all. It seems like the easiest way to do this would be to add the income to my W4 as suggested in the comments. This way I don’t have to file quarterly. I’m also considering creating an S corporation to lower the tax burden. I suppose I’m just waffling back and forth as to whether the work will be worth it. Has anybody done this? Is it fairly easy? I suppose I’d have to file quarterly then if I did this. Thanks again for everyone’s input.
jebmke
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Re: Estimated taxes

Post by jebmke »

nolesrule wrote: Thu Jan 13, 2022 8:10 am
Chemtrails wrote: Thu Jan 13, 2022 7:29 am I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point.
What exactly does this mean?

And are you asking about 2021 or 2022 and forward?
I assume it means 0 exemptions, using the old term. There are no exemptions but I still think it is used to calculate WH by payrolls.
When you discover that you are riding a dead horse, the best strategy is to dismount.
nolesrule
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Re: Estimated taxes

Post by nolesrule »

jebmke wrote: Fri Jan 14, 2022 9:23 am
nolesrule wrote: Thu Jan 13, 2022 8:10 am
Chemtrails wrote: Thu Jan 13, 2022 7:29 am I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point.
What exactly does this mean?

And are you asking about 2021 or 2022 and forward?
I assume it means 0 exemptions, using the old term. There are no exemptions but I still think it is used to calculate WH by payrolls.
Understood. But it has been 2 years since the new W-4 came out and I thought changes were required to switch to the new form. So setting exemptions to zero would have ended a couple years ago.
Topic Author
Chemtrails
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Joined: Wed Aug 25, 2021 10:29 am

Re: Estimated taxes

Post by Chemtrails »

Yes. I do remember the changes now. My apologies. For some reason it still reads “zero” on my paycheck. Perhaps this is a relic they have not changed.
jebmke
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Location: Delmarva Peninsula

Re: Estimated taxes

Post by jebmke »

nolesrule wrote: Fri Jan 14, 2022 9:30 am
jebmke wrote: Fri Jan 14, 2022 9:23 am
nolesrule wrote: Thu Jan 13, 2022 8:10 am
Chemtrails wrote: Thu Jan 13, 2022 7:29 am I dropped my withholding on my job to zero, but I don’t think that’s enough to compensate at this point.
What exactly does this mean?

And are you asking about 2021 or 2022 and forward?
I assume it means 0 exemptions, using the old term. There are no exemptions but I still think it is used to calculate WH by payrolls.
Understood. But it has been 2 years since the new W-4 came out and I thought changes were required to switch to the new form. So setting exemptions to zero would have ended a couple years ago.
New forms always take a lot of time to get traction. Payers still issue 1099-Misc instead of 1099-NEC and I suspect this will continue for a few years as payers wake up to the new forms.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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PVolker
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Re: Estimated taxes

Post by PVolker »

OP: do you have any loans, lines of credit, etc. that you pay greater than 3% APR on?
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