31

Same argument and answer for investing instead of paying off debt, or borrowing to invest. Risk. What happens if the stocks drop by 10%? Sure, you might come out ahead on average, but a drop in the market could be catastrophic from a cash flow point of view. In addition, federal tax debt is arguably the worst kind. The IRS has the authority to garnish ...


22

You will not necessarily incur a penalty. You can potentially use the Annualized Income Installment method, which allows you to compute the tax due for each quarter based on income actually earned up to that point in the year. See Publication 505, in particular Worksheet 2-9. Form 2210 is also relevant as that is the form you will use when actually ...


17

No. From 1040-ES: Exception. You do not have to pay estimated tax for 2017 if you were a U.S. citizen or resident alien for all of 2016 and you had no tax liability for the full 12-month 2016 tax year. You had no tax liability for 2016 if your total tax was zero or you did not have to file an income tax return.


14

If your total tax withholding (from your paychecks; not including estimated taxes) reaches 90% of your tax liability for this year, or 100% (110% for high earners) of your tax liability for last year, you do not have to pay estimated taxes and you will not have an underpayment penalty. (This is for federal tax; the rules for state underpayment penalties may ...


12

Here's an answer copied from https://www.quora.com/Why-is-the-second-quarter-of-estimated-quarterly-taxes-only-two-months Estimated taxes used to be paid based on a calendar quarter, but in the 60's the Oct due date was moved back to Sept to pull the third quarter cash receipts into the previous federal budget year which begins on Oct 1 every year,...


9

There are too many nuances to the question asked to explore fully but here are a few points to keep in mind. If you are a cash-basis taxpayer (most individuals are), then you are not required to pay taxes on the money that has been billed but not received as yet. If you operate on an accrual basis, then the income accrues to you the day you perform the ...


9

ADP does not know your full tax situation and while the standard exemption system (actually designed by the IRS not ADP) works fairly well for most people it is an approximation. This system is designed so most people will end up with a small refund while some people will end up owing small amounts. So, while it is possible that ADP has messed up the ...


9

While that is an extreme example, it is permissible. The IRS considers all money withheld from paychecks as meeting the requirements for timeliness, as long as in the end you make the safe harbors. People change jobs during the year, they have kids during the year, they get married during the year. So your tax situation may change during the year. A ...


6

There is a shortcut you can use when calculating federal estimated taxes. Some states may allow the same type of estimation, but I know at least one (my own--Illinois) that does not. The shortcut: you can completely base your estimated taxes for this year on last year's tax return and avoid any underpayment penalty. A quick summary can be found here (...


6

In theory, you should count it for 2017, if you could not have received the money prior to 1/1/17. See the IRS's page on constructive receipt for more details. However, I'd be concerned about the trust's reporting; they likely reported it in 2016, and you could be subject to additional scrutiny if your return doesn't match the trust's return. This sounds ...


6

Your logic is not wrong. But the risk is more significant than you seem to assume. Essentially you are proposing taking a 2.6% loan to buy stocks. Is that a good strategy? On average, probably. But if your stocks crash you might have significant liabilities. In 1929, the Dow Jones dropped 89%. In 1989, >30%. In 2008-9, 54%. This is a huge risk if ...


6

In fact - - do you pay the small penalty for not having paid estimated taxes as you go along? No, an exception to the penalty for underpayment of estimated taxes is made when no tax liability existed in the prior year. Instructions for Form 2210 indicate: Exceptions to the Penalty You won't have to pay the penalty or file this form if either of the ...


6

If you are filing joint then the important thing is to have enough withheld by the combination of both spouses withholding and estimated payments. It doesn't matter how the payments are divided between the spouses the only thing that is important is the combination. I do this every year. We both have W-2 jobs. I find it easier to adjust my withholding ...


6

You need to allocate the $30,000 recovery between payments made in 2017 and payments in 2018. For example, if you paid (and deducted as an itemized deduction) $30,000 in 2017, then the $30,000 recovery would be allocated as 60% for 2017 payments and 40% for 2018 payments. The 60% does need to be included as income on schedule 1. The 40% would affect your ...


5

Emancipation Day falls on the 16th, but is being observed on the 15th this year. This is observed only in Washington, DC, therefore the IRS is closed on the 15th. This means the next business day is the 18th. Note that Maine and Massachusetts residents have until the 19th to file because there is a state holiday (Patriot's Day) on April 18th. Source


5

I think you are confused about a few things. (Either that, or I am confused by your question. :) Let's try to clear up the confusion first. Form 1040-ES is used only if you are sending quarterly estimated tax payments directly to the IRS. This is normally done if you are self-employed. Since you are not self-employed and taxes are withheld from your ...


5

For this year, you should not need to make estimated tax payments. Tax withheld from your paycheck (W-2) will be treated as having been paid evenly throughout the year. Your major liability would be if you do not have enough withheld to pay, in which case you could suffer an underpayment penalty. You can avoid this by meeting the Safe Harbor provision: ...


5

Was the $20K state tax payment made in 2017, or made in 2018 for your 2017 taxes? If the $20K payment was made in 2017, it could have been deducted on your 2017 federal return, along with any other state tax payments. The TCJA was not in effect for 2017 and the $10K cap did not apply. It seems that you received the $30K refund in 2018. Regardless of the ...


5

Can I just make a one-time, one-off payment Yes. Do I necessarily need to fill out a 1040-ES or can I make an educated guess at the tax That part I don't know. how would I go about reporting this one-time payment when I file my 2020 taxes? https://www.irs.gov/faqs/estimated-tax/individuals "When I file my taxes at the end of the year, how do I ...


5

See the instructions for line 8 of Form 2210. This is where you determine the amount for the 100% of previous year's tax safe harbor. In part 1, you add up a bunch of different taxes. But in part 2, you subtract various tax credits, including the premium tax credit, which sounds like what you're talking about. This would make her total for line 8 negative or ...


5

The short answer is, paying missed estimated taxes from previous quarters won't avoid a penalty if there is one, but the sooner you pay, the smaller the penalty (which is the interest on the underpaid amount from when it was due to when you paid) will be. First, if on the last day of the year, your withholding (from paychecks, IRA conversions, etc.; not ...


4

No, the IRS will not "roll over" refunds towards the next year liability for past years. Applying the refund to the next year makes that refund become estimated payment. You cannot make an estimated payment after the year ended.


4

No. You don't need to pay that by June 15th. If you have stocks that are in a negative position, and sell before year end, you can negate the gain, partially or in full. From a Forbes article by my friend, Jim Blankenship - Understanding the Underpayment Penalty When you calculate the amount of tax that you owe, after you’ve subtracted however much you ...


4

Should I be worried and take proactive action and try to fix this mess or just as well I could wait for statute of limitations to kick-in? No, you should not. If you filed your tax return reporting all this gain and paid your taxes correctly, then there wouldn't really be much penalties. But collecting these penalties is the responsibility of the ...


4

The safe harbor provision is based on the tax you or the prior year. So in 2016 this helped you as your tax was substantially increased from 2015. However, by the same token in 2017 your safe harbor amount is going to be very high. Therefore if 2017 is similar you will owe penalties. The solution here is to make estimated tax payments in the quarters that ...


4

Paying estimated taxes avoids an underpayment penalty, so to determine whether or not you need to pay estimated taxes, you need to look at what triggers the penalty. An IRS article on Estimated Taxes states this: If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty ...


4

The IRS wants you to file taxes This has me spooked, because lots of people pretend to be the IRS so they can scam you. They tend to use telephone or online as the first method of contact (IRS uses postal mail only). They also like to be paid in goofy ways like Western Union, iTunes gift card, or wire transfers to funny bank accounts. Obviously, ...


4

A little less than half the contributions were pre-tax, and I understand I have to now pay tax on that amount .... When you convert a traditional IRA (or employer plan, see below) to Roth, or when you distribute it, you must pay tax on everything except post-tax/undeducted contributions, in other words on pre-tax contributions and earnings/gains. Depending ...


4

There are enough freelance workers that the IRS has a policy for this situation: the annualized installment method. The purpose of this worksheet is to determine your estimated tax liability as your income accumulates throughout the year, rather than dividing your entire year's estimated tax liability by four as if your income was earned equally throughout ...


4

Yes, absolutely you can skip estimated tax payments for 2021. Of course, you could end up owing a lot when you file in early 2022, especially if you're earning self-employment income, so make sure you save plenty to be able to pay what you owe then.


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