Estimated tax question for 2025

[MDfan]

Hoping someone can easily help me with this question. I am retired (wife still works) and trying to estimate our federal tax liability for 2025. I'm figuring our AGI at $293,000 (after taking a couple of bigger IRA distributions). That total includes about $2200 in interest and $3300 in dividends. Nothing else too difficult. To figure our tax liability on that AGI, I just used the 2025 tax tables and figured out our tax liability in each bracket (10, 12, 22, 24). The amount I come up with is about $56,015 in federal tax for 2025.

The guy who completed our taxes is coming up with a number about $7500k higher and is telling us we should pay about $2500 in quarterly federal estimated taxes. My figure is a good bit lower than that and I don't want to pay more that I should and try to get a refund.

Am I figuring the tax liability the right way? Basically, just using the tax bracket table and figuring how much tax we owe in each of the 4 brackets? Or am I missing something?

[Chuckles960]

... The guy who completed our taxes is coming up with a number about $7500k higher...

There are any number of web calculators that will do the calculation for you to check your numbers. To me, your number looks a little high for MFJ---did you take the standard deduction? Anyway, $7,500,000 more is certainly excessive, and even $7500 more may be high. Now this is just for federal income tax; FICA and so forth is additional, as are state taxes if any.

PS $2500 is not 1/4th of $7500.

PPS If you need high precision, you need to estimate how much of the dividend is qualified. But anyway, check the estimator web pages, but I think $51K should cover it nicely.

[Katietsu]

Your number is closer to mine than is your tax preparer’s. I
Your liability will be impacted if your wife or yourself are over 65, your wife is not an W-2 employee, or your dividends are qualified. Are you trying to get as close as possible or do you just want to avoid the underpayment penalties. If the latter, I would review the safe harbor options and decide which is the easiest to meet.

[MDfan]

Your number is closer to mine than is your tax preparer’s. Are you trying to get as close as possible or do you just want to avoid the underpayment penalties. If the latter, I would review the safe harbor options and decide which is the easiest to meet.

Thanks. This question is only about federal taxes (standard deduction already figured in to the AGI). Im just trying to get as close as possible. Obviously, want to avoid penalty as well. I just want to make sure I’m figuring it the right way.

[retiredjg]

Hoping someone can easily help me with this question. I am retired (wife still works) and trying to estimate our federal tax liability for 2025. I'm figuring our AGI at $293,000 (after taking a couple of bigger IRA distributions). That total includes about $2200 in interest and $3300 in dividends. Nothing else too difficult. To figure our tax liability on that AGI, I just used the 2025 tax tables and figured out our tax liability in each bracket (10, 12, 22, 24). The amount I come up with is about $56,015 in federal tax for 2025.

The guy who completed our taxes is coming up with a number about $7500k higher and is telling us we should pay about $2500 in quarterly federal estimated taxes. My figure is a good bit lower than that and I don't want to pay more that I should and try to get a refund.

Am I figuring the tax liability the right way? Basically, just using the tax bracket table and figuring how much tax we owe in each of the 4 brackets? Or am I missing something?

https://engaging-data.com/tax-brackets/

Using this calculator, I get a number lower than either of yours.

Did you subtract for deductions (standard or itemized)?

A lot of people seem to like this one. https://www.mortgagecalculator.org/calc ... ulator.php

[retiredjg]

This question is only about federal taxes (standard deduction already figured in to the AGI).

The standard deduction has not yet been subtracted from the number that is your AGI. Standard deduction has been subtracted from your "taxable income" (line 15 on your tax return).

Since you did this by hand, I don't think that is where the error is though.

I could be that you told your tax preparer that your AGI was $293k when it was really your taxable income was $293k.

[MDfan]

This question is only about federal taxes (standard deduction already figured in to the AGI).

The standard deduction has not yet been subtracted from the number that is your AGI. Standard deduction has been subtracted from your "taxable income" (line 15 on your tax return).

Since you did this by hand, I don't think that is where the error is though.

I could be that you told your tax preparer that your AGI was $293k when it was really your taxable income was $293k.

I told him $293k after the standard deduction so that would be line 15, correct? And even if I had made that mistake and told him AGI was 293k, shouldn’t his number have come out lower than mine? He came up with about $63,300 as the federal tax owed on $293k.

[retiredjg]

I told him $293k after the standard deduction so that would be line 15, correct?

That sounds correct, but I don't know how you came up with that number.

And even if I had made that mistake and told him AGI was 293k, shouldn’t his number have come out lower than mine? He came up with about $63,300 as the federal tax owed on $293k.

Yes. Just throwing out ideas and observations. I'm at a loss as to how you got such different numbers and why both of yours are higher than mine. Let us know if you find out.

[MDfan]

I came up with $293k as the taxable after adding/estimating salary, my pension, IRA distributions, and dividend/interest income. The total was actually $323k and I just subtracted the $30k standard deduction. I just wanted to make sure I was using the tax tables correctly to determine tax liability.

[JBTX]

I copied and pasted your post into Grok 3 app. Grok came up with answer about $2500 higher than yours, and breaks down where the discrepancies may be. It couldn’t figure out how to get to the CPA number.

Grok is pretty amazing.

[FiveK]

Any of the Tax estimation tools that fit your situation should give you as accurate a result as your inputs.

[john1099]

If I use the Form 1040-ES instructions and plug 293,000 into Schedule Y-1 on page 7, I get

35,302 + .24 × (293,000 − 206,700) = 56,014

To get 63,300, I'd need to plug in about 323,360 ...

35,302 + .24 × (323,360 − 206,700) = 63,300

Maybe your tax guy used 323,000 instead of 293,000?

[ee_guy]

Here is a spreadsheet screenshot of the calculations. Total tax based on the information is $56,223

[cas]

The guy who completed our taxes is coming up with a number about $7500k higher and is telling us we should pay about $2500 in quarterly federal estimated taxes. My figure is a good bit lower than that and I don't want to pay more that I should and try to get a refund.

Have you checked whether the tax guy is using the "110% of previous year's tax bill (i.e. 2024)" Safe Harbor method to recommend estimated tax amounts for 2025?

You are certainly free to calculate an estimated tax payment plan using one of the other Safe Harbor methods that involves predicting your 2025 income in advance.

However, I wouldn't be surprised if "tax guys" have a policy of basing an estimated tax payment plan on the Safe Harbor method that uses the known 2024 tax bill. That way, customers can't come back and accuse them of being liable for an underpayment penalty at tax time next year (even though it was the customer's faulty crystal ball about their predicted 2025 income that produced the underpayment penalty.)

[retiredjg]

I came up with $293k as the taxable after adding/estimating salary.....

Not all of your salary gets reported as taxable income on your w-2. For example, your contributions to pre-tax 401k plan and to pension, and the cost of employer sponsored health insurance. I'm not sure if FICA or other off the top taxes are subtracted or not.

Again, this does not explain why the CPAs number is higher than yours. Just something to know.

[retiredjg]

The amount I come up with is about $56,015 in federal tax for 2025.

Using https://engaging-data.com/tax-brackets/ married filing jointly and no LTCG, I get 56,014 on $323,000.

I think you are just going to have to ask how he got his number.

(Adding the standard deduction of $30k to 323,000 gets 63,214 which is not very different from "$7500 above".)

[Mullins]

Try this tool for estimating your fed tax, setting the year at the top of the page for 2025:

https://cotaxaide.org/tools/Estimated%2 ... sheet.html

[MDfan]

I came up with $293k as the taxable after adding/estimating salary.....

Not all of your salary gets reported as taxable income on your w-2. For example, your contributions to pre-tax 401k plan and to pension, and the cost of employer sponsored health insurance. I'm not sure if FICA or other off the top taxes are subtracted or not.

Again, this does not explain why the CPAs number is higher than yours. Just something to know.

Thanks. I'm basing that salary number on wife's 2024 W-2 and my pension statement which should both be almost identical in 2025. The safe harbor explanation above may be the best one.

[MDfan]

Try this tool for estimating your fed tax, setting the year at the top of the page for 2025:

https://cotaxaide.org/tools/Estimated%2 ... sheet.html

Thank you. I used that and came out with my number.

[retiredjg]

The safe harbor explanation above may be the best one.

I agree. Easy enough to figure out....what is 110% of this year's tax?

[retiredjg]

Here's another idea. He probably does not know how much your wife is withholding. Maybe he calculated the number as if she is not using withholding at all? Or withholding less than she actually is?

[MDfan]

Here's another idea. He probably does not know how much your wife is withholding. Maybe he calculated the number as if she is not using withholding at all? Or withholding less than she actually is?

No, I gave him all the numbers (including withholding) and they should be almost identical to last year's numbers (and he has those numbers). I'm just going with my estimate based on my calculations and the calculators provided. And probably doing my own taxes next year. Thanks for your help.

[retiredjg]

Ha ha. I don't think I was very helpful.

[grok87]

Here's another idea. He probably does not know how much your wife is withholding. Maybe he calculated the number as if she is not using withholding at all? Or withholding less than she actually is?

No, I gave him all the numbers (including withholding) and they should be almost identical to last year's numbers (and he has those numbers). I'm just going with my estimate based on my calculations and the calculators provided. And probably doing my own taxes next year. Thanks for your help.

if you use turbotax to do your taxes next year, you can have it project your estimated taxes for the following year.
cheers,
grok87

[MDfan]

Ha ha. I don't think I was very helpful.

You were.