Trying to figure out estimated taxes, filing jointly...

[dsallen]

My current situation:

Wife is finishing up residency, also moonlights

I graduated residency, currently partner/K1 and moonlighting

 

Did the estimated taxes for September 15th date but I feel like I did this wrong heading into paying the January 15th taxes.

I want to use the safe harbor rules with 110% applied. My wife and I file taxes jointly.

Our withholding last year was 11,459. Thus far, this year my withholding is 5670.43 (from Jan-June, plus some moonlighting with taxes withheld) and my wife's is 7465.23. Some quick addition would give you 13,135, which is greater than our withholding from last year.

Safe harbor would tell us that our amount to be paid each quarter would be [(last year's withholdingx1.1)-taxes paid this year]/2 or [(11,459x1.1)-13,135]/2 = -265!!!!

 

On September 15th I forgot to subtract the taxes we had already paid this year and ended up giving 3K to the fed and 1K to state. Any idea where to go from here...? Do I pay any amount for January 15th? Does it matter? It seems clear that we will have paid over the amount of the safe harbor rule. We have saved ~50K so far for when tax day rolls around.

Thanks for reading.

[jfoxcpacfp]

Safe harbor rules come into play if your prior year AGI was $150k+ (MFJ). If that is the case, you need to pay the lesser of 110% of the tax due on your return for the prior year - not 110% of the amount withheld from your paychecks in the prior year. If you expect your AGI to be less this year, then you’ll need to pay in by withholding or estimated payments at least 90% of your current year’s estimated tax bill.

[dsallen]

Thank you for the reply. I did mean total taxes due rather than taxes withheld. In any case, I think my situation shakes out the same. Can anyone else help clarify?

[jfoxcpacfp]

Got it. Looks like you w/b fine to wait until 4/17/18 to pay your balance due. You have already paid in 110% of your 2016 income tax liability with withholding only plus an additional $3k you sent in September.

[dsallen]

great thank you!!!!!

[Overlap12]

Also trying to figure out whether I need to pay estimated taxes.  My wife's regular annual income is doubling from ~$300k in 2018 to about ~600k in 2019.  She is also receiving a taxable lump sump of about $500k.  Altogether our combined AGI will be over $1M in 2019.  Am I safe in thinking her regular payroll tax withholding will withhold at least 110% of tax owed in 2018, and instead of making an estimated payment to the IRS for the lump sum I can invest that money in a CD earning interest until I need to pay in April 2020?

[Peds]

is she 1099 or W2?

 

also you are an accountant....?

[jacoavlu]

Overlap12 wrote:

Also trying to figure out whether I need to pay estimated taxes.  My wife’s regular annual income is doubling from ~$300k in 2018 to about ~600k in 2019.  She is also receiving a taxable lump sump of about $500k.  Altogether our combined AGI will be over $1M in 2019.  Am I safe in thinking her regular payroll tax withholding will withhold at least 110% of tax owed in 2018, and instead of making an estimated payment to the IRS for the lump sum I can invest that money in a CD earning interest until I need to pay in April 2020?

Click to expand...

What was 2017 form 1040 line 63, total tax? You need to have paid 110% of that number to avoid penalty.

Balance above that can be paid 4/15.

[Overlap12]

W2 employee.  I'm a licensed CPA but I'm not a tax accountant.  I work for a mutual fund complex.  Very different accounting than individual tax returns!

[Overlap12]

I'm actually trying to figure this out for the 2019 tax year.  I will be filing my 2018 taxes in the next few months, but will receive a lump sum of money this month.

[jacoavlu]

Overlap12 wrote:

Also trying to figure out whether I need to pay estimated taxes.  My wife’s regular annual income is doubling from ~$300k in 2018 to about ~600k in 2019.  She is also receiving a taxable lump sump of about $500k.  Altogether our combined AGI will be over $1M in 2019.  Am I safe in thinking her regular payroll tax withholding will withhold at least 110% of tax owed in 2018, and instead of making an estimated payment to the IRS for the lump sum I can invest that money in a CD earning interest until I need to pay in April 2020?

Click to expand...

You should not assume withholding will meet the safe harbor. It is your responsibility to confirm. Also her job knows nothing of a $500k taxable lump sum so they would not withhold that tax liability unless you instructed them to.

[jacoavlu]

Overlap12 wrote:

I’m actually trying to figure this out for the 2019 tax year.  I will be filing my 2018 taxes in the next few months, but will receive a lump sum of money this month.

Click to expand...

So you just need to figure out your 2019 safe harbor amount. 2018 form 1040 line 15. Make sure you withhold 110% of that number in 2019 and you’ll be ok.

[Overlap12]

Agreed I will be checking on her payroll withholding.  The lump sum won't have any tax withheld, but assuming her W2 has double the federal and state tax withheld in 2019 than we paid in 2018, I wouldn't have to make an estimated tax payment on the lump sum right?  There's no special provisions for lump sums?

[Peds]

Overlap12 wrote:

Agreed I will be checking on her payroll withholding.  The lump sum won’t have any tax withheld, but assuming her W2 has double the federal and state tax withheld in 2019 than we paid in 2018, I wouldn’t have to make an estimated tax payment on the lump sum right?  There’s no special provisions for lump sums?

Click to expand...

i would just reset your W4 withholding to account for your expected tax burden.

[jacoavlu]

Overlap12 wrote:

Agreed I will be checking on her payroll withholding.  The lump sum won’t have any tax withheld, but assuming her W2 has double the federal and state tax withheld in 2019 than we paid in 2018, I wouldn’t have to make an estimated tax payment on the lump sum right?  There’s no special provisions for lump sums?

Click to expand...

Double means nothing. The tax code is progressive. So 2x income can mean more than 2x tax. Plus you have a lump sum payment. I have instructed how to figure your safe harbor amount above.