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If you read the first link. There are exceptions and one of them is retired or 62. I wonder how accurate is Turbotax. I've caught their mistakes on many years ago.
For my 2017and 2018, I will have to pay this penalty because I will owe tax due to Roth Conversion but not as BellaL here, where she gets a refund but still owe this tax.
I could not thank you enough for saving me $307 in tax penalty. I opened TT Tax form 2210 and it had automatically filled all the information for me with WRONG ASSUMPTIONS that the income was distributed evenly over the year.
It took me a while to calculate and fill form 2210 Schedule AI (Annualized Income Installment Method) but the end result is that I did not have to pay a penalty.
It's a good thing that I keep a good record of quarterly income in a spreadsheet.
I think for this year, I probably will just go ahead and pay my estimate taxes in equal installments. This way I don't have to jump through many hoops and hours of calculations!
Worked for the IRS for 31 years. Cannot count the number of times I had to either explain, adjust or calculate the Est. Tax Penalty. I dont keep up with all the changes, so I normally post the site so others can check it out and decide if it is correct for their situation.
I have tax withholding every month from my pension, calculated to give me a small refund every year. That way, fortunately, I never have the problem which BellaDL experienced.
I have tax withholding every month from my pension, calculated to give me a small refund every year. That way, fortunately, I never have the problem which BellaDL experienced.
How did you calculate how much to have held back? A 'what if' scenario in TurboTax?
How did you calculate how much to have held back? A 'what if' scenario in TurboTax?
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I filled out the W2 form for the retirement system and based on that they decided how much to withhold. Then in addition (to allow for a rather small amount of other income) I added a small dollar amount to be withheld each month. The latter was just guesswork on my part, nothing sophisticated. Then I can adjust that dollar amount each year according to the results. It is easy to do; we just log onto our retirement account and do it and there is a separate designation of additional dollar amount (or none) for federal and state.
]If most of your untaxed income comes in one quarter, such as stock dividends paid at year's end, or if you operate a business in which income fluctuates throughout the year, you might want to consider paying your estimated taxes under the annualized income system.
"The annualized method allows you to take a look at each quarter independently and pay the tax in the quarter that you earned it," says Durand. "Say your job is one where most income is in the summer, such as landscaping, rather than the winter. You want to pay the taxes when you have the money."
Here is a link to a discussion though we now have it going in the right direction. There is an IRS publication. 505 I think that covers all this. I am sure Sweetana3 can confirm.
And of course, when there is a significant life change, you might want to consult a tax professional.
I had a very bad experience with a tax professional years ago when I had a major life change: graduated, sold a house, moved to another state and bought a new house.
I checked around for recommendation for a tax firm. The owner had all kinds of credentials. He was a tax accountant and a financial planner. He let his young wife handled my return and she screwed it up royally leaving out all kinds of deductions. Once I realized that she had left out the child care deduction, I decided to go through the entire return myself.
I spent hours at the library to read pages and pages of tax return instructions and redid all the forms. The bottom line was that she made something like $10K error in favor of the IRS. When I went back to the firm and showed the owner the errors, he offered to recheck my taxes, confirmed that my version was correct and refunded the fee.
It was the one and only time that I used a tax professional for my tax returns. Of course there are a lot things that I don't know about taxes like this estimated tax payments in a year that one's income varies a lot. I much rather ask questions, dig for information and learn than going to an unknown tax preparer.
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