quarterly taxes for income jump

[resident_1]

This year our income (both are w-2, zero income state tax) is increasing significantly from $240k/yr to $500k/yr during 2018. I'm now figuring out quarterly taxes for us to pay. Please comment if any issues with my approach.

My plan is not to do the safe harbor approach of multiplying 2017 taxes owed x1.1 then diving by 4.  Because I don't want to have a big tax bill come April 2019. And also because in 2017 we got a tax refund.

Rather I used the Estimated tax worksheet to figure out quarterly tax payments.  For us payment is ~$7k/quarter (or $2,333/month). This maybe an overpayment, but in 2018 I'd rather be on safe side and then adjust for next year accordingly. Also my wife may get a bonus twice per year.

How about asking employer to withhold $2,300/mo from paycheck and then I can avoid paying quarterly taxes all together?

 

[DMFA]

Wait, hold up...do W-2 earners often pay estimated quarterly taxes? Do you not just adjust your withholding on your W-4 for your employer?

[Peds]

W2 means you withhold taxes each paycheck. you need to adjust your W4.

 

[jfoxcpacfp]

You have done the calculations, just request to fill out a new W4 form with your employer. There is a box to request an additional amount to be withheld on your paycheck so just calculate how much based upon your pay schedule. Withholding is preferable to quarterly payments because that is treated as spread evenly throughout the year (even if you increase them substantially at the eoy) while quarterly payments are timed at the moment of payment. Given that you are planning for a refund, that won’t be an issue with you if your calculations bear this out, but that is the general rule.

Congrats on the “raise”!

[q-school]

i'm w2 and i pay quarterly taxes.  despite having an extra thou withheld per paycheck.   sometimes the investment returns have been significant enough that the irs took attention.  i think i had to pay 60k extra one year in april.  since then we pay quarterly taxes.  sometimes we get 30k back or last year we got some weird credit for this year.

maybe we are doing something wrong.  maybe the cpa is conservative.

[bean1970]

DMFA wrote:

Wait, hold up…do W-2 earners often pay estimated quarterly taxes? Do you not just adjust your withholding on your W-4 for your employer?

Click to expand...

yes. we always have. Need to cover the taxes on all our passive income. Even withholding my entire W2 salary to zero isn't enough to cover. why i work is a mystery.......

[joeblo]

Offhand comment ... I am a K-1 partner in an LLC and simply pay estimated taxes monthly with a click (see URL below). I am sure there are good reasons to just pay quarterly but I just hate (strange as it seems) to see that "tax due" grow for 3 months then send it in.  Most folks mail, but it is just an easy click away.  I like to send mine in monthly so I treat it just like any other bill.  If it was a good month I will pay more ... a bad month I will pay less.

Long story short ... when I began paying estimated taxes years ago I was not aware it could be done monthly nor that it could be done electronically instead of mail.  Maybe (or not) you'll find this of interest.  Best wishes.

https://www.eftps.gov/eftps/

[jfoxcpacfp]

DMFA wrote:

Wait, hold up…do W-2 earners often pay estimated quarterly taxes? Do you not just adjust your withholding on your W-4 for your employer?

Click to expand...

Yes, especially common with s-corp shareholders or if you have a side hustle.

[VagabondMD]

q-school wrote:

i’m w2 and i pay quarterly taxes.  despite having an extra thou withheld per paycheck.   sometimes the investment returns have been significant enough that the irs took attention.  i think i had to pay 60k extra one year in april.  since then we pay quarterly taxes.  sometimes we get 30k back or last year we got some weird credit for this year.

maybe we are doing something wrong.  maybe the cpa is conservative.

Click to expand...

I am in a similar boat. I have some investment return and income from K-1’s that is unpredictable. My wife’s payroll department (per her) is not very flexible. My CPA has been little help in guiding me here, but I have been pretty good at getting it close. I have not had to pay more than a few thousand dollars in April or pay a penalty in at least ten years.

[Tabaxus]

joeblo wrote:

Offhand comment … I am a K-1 partner in an LLC and simply pay estimated taxes monthly with a click (see URL below). I am sure there are good reasons to just pay quarterly but I just hate (strange as it seems) to see that “tax due” grow for 3 months then send it in.  Most folks mail, but it is just an easy click away.  I like to send mine in monthly so I treat it just like any other bill.  If it was a good month I will pay more … a bad month I will pay less.

Long story short … when I began paying estimated taxes years ago I was not aware it could be done monthly nor that it could be done electronically instead of mail.  Maybe (or not) you’ll find this of interest.  Best wishes.

https://www.eftps.gov/eftps/

Click to expand...

I had no idea I could do this.  (This is my first full year being on a K-1 instead of being W-2.)  Part of me says that I should keep my money in my bank account to get the interest on it, but part of me feels like it would be so much easier to just pay monthly and be done with it....

[childay]

resident_1 wrote:

My plan is not to do the safe harbor approach of multiplying 2017 taxes owed x1.1 then diving by 4.  Because I don’t want to have a big tax bill come April 2019. And also because in 2017 we got a tax refund.

Click to expand...

Why would you not do safe harbor?  You could be getting at least some interest on the money throughout the year.  Unless you are worried you will spend it and then be in trouble in April..

[Peds]

Lol what interest?

[DMFA]

No one originally said anything about non-W-2 income. That's why I found it odd.