If I know my taxes will be much lower this year (retiring in April) compared to last year's, do I still have to pay the Estimated taxes? Say I have to pay $3000/quarter on Estimated because of last year's earnings, but this year it's even possible that I will receive a refund, so can I safely not pay those $12k? or do I have to pay them and then receive them as extra refund over several years? (and what about State's Estimated Taxes, same thing?)
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1It would be best to mention the country you're asking about, and what is the source of your income. I'll take the liberty of marking it as "US" (since in my experience it is mostly Americans who'd think they're the only country in the world), and "self-employed", since in the US only self-employed are required to do estimates.– littleadvFeb 28, 2014 at 19:18
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yes, US. No, not self-employed, but about half my income comes from stock gains (and without withholding, unlike my salary). I do my taxes with Turbo Tax and as I understood I had to pay the Estimated taxes, not optional (unless I missed something)– RodolfoFeb 28, 2014 at 20:31
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2so why not to withhold more?– littleadvFeb 28, 2014 at 21:26
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1@littleadv rude, snarky comment. This is a .com site, not a .co.uk or any other country-specific site. Thus, it's perfectly reasonable for a US resident to not think about the US tag.– RonJohnDec 13, 2017 at 3:05
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1 Answer
There are a number or 'safe harbor' rules that apply to this scenario, but if you won't have any tax due at all, or are getting a refund, no need to pay more via quarterly.
90% of the tax for the year, or 100% of what your total tax bill was last year is the safe harbor.
Run the numbers you forecast for 2014, and see what TT tells you.
answered Feb 28, 2014 at 19:03
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Well, I will probably have a tax due. What'll happen is that my income for the year will be about 50% lower than last year's.– RodolfoFeb 28, 2014 at 20:36