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I use TurboTax Home & Business to do my taxes every year. Since the 2017 edition is out and since I won't be receiving any more income this year, I've used it to figure out what my 2017 federal and state tax payment will be.

Since 4th quarter estimated taxes aren't due until mid-January, I can just make that payment be the exact amount I have left to pay given my first three estimated tax payments. That way, my annual taxes will be zero: I don't owe anything and I'm not due a refund.

After filling in those numbers in TurboTax, it says I don't have to pay any kind of estimated tax penalty, so there's no issue there.

This seems like a good idea to me, since I don't have to deal with making any payments nor wait for the government to issue me a refund. I'm just done and can file my taxes immediately.

So my question is... is there any reason not to do that?

For example, does the IRS look suspiciously on annual taxes that have no payments or refund? Or is there some kind of benefit or loophole I'm missing by doing this? I honestly have no idea!

  • By the way, if your itemize deductions on your federal taxes, and your state income tax and property tax totals to more than $10,000, you might consider making that last payment for 2017 state taxes now in 2017 rather than January 2018. That way it will count under your 2017 federal itemized deductions, rather than 2018's, because the sum of state income tax and property tax deductions for 2018 is limited to $10,000. – user102008 Dec 22 '17 at 19:09
  • @user102008 Thanks for the tip, though I'm taking the standard deduction for 2017. – GuyGizmo Dec 22 '17 at 19:11
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I guess this is a bit late, but: As long as you're going to the effort of doing your taxes, you might as well ... do your taxes. File a tax return, submit your payment, and be done with it.

According to this site, if you file your taxes before Jan 31 and include your remaining tax liability, you don't have to make a 4th quarter estimated tax.

  • A drawback to this is that most companies don't issue W-2s until February. If filing electronically, it is not necessary to have received the W-2, as long as you're sure you know what it is going to say. – prl Jan 23 '18 at 2:19
  • @pri Presumably, the OP knows what the W-2 is going to say, seeing as how they are confident in calculating their tax liability. – Acccumulation Jan 23 '18 at 15:48
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As in many things financial, the answer is, “It depends.”

The IRS will penalize the taxpayer if withholdings and tax payments are not at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. There is no penalty if the payment owed is $1000 or less. Source: https://www.irs.gov/taxtopics/tc306

Many taxpayers prefer, because of this, to end up 10% under withheld and leave the final payment in investments until April 15th. There is, of course, a risk that the invested assets may decline in value rather than increase. The IRS will not feel sorry for you; they will simply demand the check for the full amount!

If the amounts are small, meaning that the 10% under withheld is a few hundred dollars, then the few cents or dollars of investment gain may not be worth the extra effort.

For the period January 1, 2017 to April 15, 2017, and S&P 500 index fund would have returned about 3.5%. Therefore, a $1000 final payment would have earned about $35.

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    Okay, doing what I'm suggesting wouldn't incur a penalty since it would be paying 100% of my taxes for the current year. I hadn't considered not paying some of the money so it can be used instead in an investment account, but I'm not currently financially stable enough nor paying enough money in taxes to make it worth opening an investment account right now. – GuyGizmo Dec 23 '17 at 16:58

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