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Forum|Forum|2 years ago
February 25, 2024
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We pay estimated taxes every year. As I understand the IRS rules, we can pay the prior year tax or estimate your current year income and pay at least 90% of that amount. I blindly accepted TurboTax suggestion last year which caused a bit of overpayment. Before using TurboTax, I simply would use my prior year tax as my current year estimate. TurboTax calculates a number that is greater than the prior year tax, at least for my case for the 2023 and 2024 tax years. How does TT calculate the estimated taxes for the current year when it does so as part of the tax filing?

Not using real numbers, but let’s assume I paid $50,000 in taxes for 2023. I would assume 4 payments of $12,500 ($50,000/4) but TT is generating a higher number akin to $13,500 which totals $54,000. I know I can do my own calcs but just wanted to know the basis for TT calcs.

Best answer by OddDuck

It looks like Turbotax's choices for calculating estimated tax payments are

- 100% of your prior year's taxes owed (or 110% if your income was over a certain threshold)

- 90% or 100% of what you estimate you'll owe for the current year

- 66.667% of what you estimate you'll owe if you're a qualified farmer or fisherman

The 110% calculation is used if your AGI is greater than $75,000 for single and separate filers and $150,000 for married filing joint, so perhaps that's what it's doing for you?

More info here: https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-pay-and-when/L3OPIbJNw

MinhT1

There are special rules for higher income taxpayers.

The IRS says on page 1 of this document:

If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100% in (2b) under General Rule, earlier. This rule doesn’t apply to farmers or fishermen.

So to avoid the penalty, you have to pay 90% of this year's taxes or 110% of the previous year's taxes.