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Why would I get a penalty? My employer takes out the taxes for me. I claim two dependents (I have two kids). They figure out the rest. If it’s too little, it’s not my fault. Either way, they get their money on April 15. I’m just paying what I would have been paying all along.
You could not be more wrong. Your employer is only responsible for withholding consistent with what you enter on your w-4. You are responsible for everything else.
You can’t always use your last year’s taxes to predict.
You might have investments that affect the current year. You might sell your home/property and get a big tax bill. You might decide to get a new mortgage or have big health bills.
This is especially true for retirees and business people.
Avoid a Penalty
To avoid a penalty, pay your correct estimated taxes on time. Find how to figure and pay estimated taxes.
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:
Your filed tax return shows you owe less than $1,000 or
You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.
If you "let the employer do it" you could run into problems. Your employer may have a chart that shows what the exemptions mean for withholding.
Depends if/when you have interest, dividend, capital gain income to add to your pay.
Well that's the "rule", but generally, if you are submitting tax payments regularly throughout the year, you are not going to get penalized. I had a tax bill of more than $1k last year, and my payments totaled less than 90% of the liability for the prior year. Same was true of the previous year.
Well that's the "rule", but generally, if you are submitting tax payments regularly throughout the year, you are not going to get penalized. I had a tax bill of more than $1k last year, and my payments totaled less than 90% of the liability for the prior year. Same was true of the previous year.
Submitting payments regularly throughout the year is meaningless if you don’t meet one of the safe harbors. Are mistakes made where penalties aren’t assessed when they should be? Absolutely, doesn’t mean it won’t happen the next time.
You said the payments didn’t equal 90% of the prior year. That isn’t the safe harbor, it’s 90% of the current year. Did you meet that threshold possibly?
You can’t always use your last year’s taxes to predict.
You might have investments that affect the current year. You might sell your home/property and get a big tax bill. You might decide to get a new mortgage or have big health bills.
This is especially true for retirees and business people.
I didn’t suggest using last years taxes to predict anything in the current year, but thanks for the refresher. I really needed it. Instead, I said you should base your estimated taxes on your prior year liability, and thus you can avoid the issues that you were alluding to.
You could not be more wrong. Your employer is only responsible for withholding consistent with what you enter on your w-4. You are responsible for everything else.
I’m not sure what you are talking about. Me, my wife or us as a married couple have never been penalized. We both tell our employers that we file jointly and have two dependents. Been doing this for over 20 years. I think we are doing it right and not sure what you are talking about. We are doing just fine. Thanks anyway.
I’m not sure what you are talking about. Me, my wife or us as a married couple have never been penalized. We both tell our employers that we file jointly and have two dependents. Been doing this for over 20 years. I think we are doing it right and not sure what you are talking about. We are doing just fine. Thanks anyway.
Do you disclose all your income to your employers? I doubt it. What you are doing is now working through the w4 which is more involved now in the last few years than it used to be. All the information is self reported, based on estimates and not verified. If your numbers are off it’s all on you and you’d be subject to penalty, that’s mostly what the other poster is referencing
I’m not sure what you are talking about. Me, my wife or us as a married couple have never been penalized. We both tell our employers that we file jointly and have two dependents. Been doing this for over 20 years. I think we are doing it right and not sure what you are talking about. We are doing just fine. Thanks anyway.
That surprises me. I had assumed that all workers use the W-4.
Your employer has no business knowing how you plan to file your taxes [Single, Married Joint, or Head of Household], or how many dependents you have.
Marital status and allowances have been on the W-4 going back at least to 1987 (I didn’t look earlier).
Last edited by Lizap; 09-02-2023 at 12:40 PM..
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