As you prepare your current (year) taxes, always keep a copy of your last years taxes (handy) to review, in an (easy) effort to locate, define, and utilize those pesky numbers that sometimes linger just out-of-site(memory).

The IRS throws away the forms every October, so if you don't have a copy of last year's forms handy, you'll have to do a lot more work.

Thanks for writing.

No penalty for underpayment because I used a safe harbor provision: paying estimated taxes equal to the previous year's (2021's) actual taxes is all that is required. In 2021 my taxes were low because of a huge deduction that I've had for 6 years through 2021. From 2022 onward my taxes are going to be quite a lot higher than they have been for 6 years. Ughh. In 2023 my estimated taxes will be nearly $3000 quarterly (federal and state combined).

I have a feeling that I ended up doing that in effect anyway.

I threw a pile of money electronically at the feds back in December, hoping that that would cover my taxes. It wasn’t enough. I still owed a bunch. I made today the payment day, as it’s the weekend. Nothing will take effect until Monday anyway. I assume the IRS will be accepting Monday on Monday, DC’s Emancipation Day notwithstanding.

The first safe harbor provision, meaning no penalties for underpayment, is (say we're talking about paying estimated taxes in 2023 for 2023 tax year):

Pay at least 100% of 2022's actual tax

The second one is:

Pay at least 90% of 2023's actual tax (requires good predictive capability).

If either one is met, no penalty. The above are for AGI's of $150,000 or less (same for singles, heads of households and married filing jointly).

For AGIs over $150,000 the first percentage is 110%. The 2nd one is the same 90%.

Edited to add If one's tax is less than $1000, or one's tax minus withholding is less than $1000 (don't count estimated payments, just withholding) one is safe. This from looking at the top of Form 2210 /END EDIT.

On paying a year's estimated taxes lumped late in the year: They calculate required tax payments on a quarter - by quarter basis (roughly, see p.3 of Form 2210). One can contest that, e.g. I have a lot of "income" in December because that's when I do Roth conversions and do my IRA RMD's (both count as taxable income), but then one has to fill out Form 2210.

https://www.irs.gov/pub/irs-pdf/f2210.pdf

A harsh experience from an earlier year with TurboTax: in that year I had a $3 underpayment penalty for federal. I could have contested that by filling out Form 2210, but then TurboTax would not let me file electronically and I'd have to print and mail it in. Obviously its not worth my time / expense for a $3 saving.

As for Minnesota, I had a $2 underpayment penalty. TurboTax would not let me file electronically, FFS, even though I wasn't contesting it. IOW, simply having a Minnesota underpayment penalty forced me to print and mail it in.

Edited to add: Both underpayment penalties resulted from paying too little early in the year, not because my payments in total were below the requirement. My total year cumulative payment did meet the requirement. /END EDIT

Dunno if TurboTax / Minnesota is still that stupid, that was 4 or 5 years ago. But probably.

Disclosure: I'm *NOT* a tax professional, just another anonymous message board rando.

If the feds are going to do that for me, I’m happy to let them do the work.

I have been using TurboTax because the data are used in both forms and the state does require a copy of the federal return to be included.

Virginia does not let me file online. I have to fill out a paper form and mail that in. I do not have to include a copy of my federal form. All Virginia wants from the federal form is the AGI. Also, I have to use the same kind of deductions for both. I can't have itemized deductions on one and the standard deduction on the other.

Last edited Sat Apr 15, 2023, 06:28 PM - Edit history (1)

I took a glance at it
https://www.irs.gov/e-file-providers/free-file-fillable-forms

and it said "limited basic calculations"

My taxes have so many calculations that I can't imagine getting everything right by doing most calculations by hand and filling it all in. All the extra forms like the Social Security worksheet and the Qualified Dividends and Capital Gains Tax Worksheet, Form 1116 Foreign Tax Credit (and its own Schedule B totaling 4 pages), Form 8606 (because I've had non-deductible IRA contributions), Form 8995 (Qualified Business Income Deduction Simplified Computation [LOL]), Qualified Business Income Deduction Summary, Capital Loss Carryforward Worksheet, and some more. I'm just astonished at the number of intermediate calculations involved.

I've used TurboTax for 5 years now, before that CPAs since the beginning.

I also have a state income tax (Minnesota), though I'd be game to tackle that by hand if I had my federal done reliably. (Edited to add: I've been using TurboTax for the state too. The extra $54 for the state is worth it to avoid making mistakes and missing out on something that can lower taxes, and perhaps less hassle ).

mostly because state tax is deductible on the first but not the second.

And... if you made charitable contributions you can still deduct some of it in the Minnesota. M1M

The free fillable forms include a limited array of forms. You might well not be eligible.

When the software calculates totals on an 8949, the corresponding boxes on the Schedule D are autopopulated. When the software calculates totals on the Schedule D, the corresponding line on the Form 1040 is autopoulated. If you owe, the 1040-V has the amount already in place. Very nice.