Permalink Submitted by Jane Ackerman on Tue, 2017-08-15 16:44
I would like to stop using the estimated taxes and increase the withholding from pensions, SS and Rollover Ira distributions as I am no longer working. Could I do that starting in 2018 without any penalty for no longer using estimated taxes?
Permalink Submitted by tomd37 on Tue, 2017-08-15 19:02
As you might already know, withholding from SS benefits can only be a certain percentage; specifically 7, 10, 15 or 25. My wife and I have tax withheld from our SS benefits. Also when I take my RMD about this time of year I calculate my estimated federal tax owed for the year and have just enough withheld to bring any amount due or refund amount to as close to zero dollars as I can (within reason). I prefer to owe a small amount when filing so that if someone happened to steal and use one of our SS numbers, any refund would not be held up. I had a friend whose SSN was stolen and used on a fraudulent tax return and it took him 11 months to get his federal refund. Tom D.
Permalink Submitted by Alan - IRA critic on Tue, 2017-08-15 19:32
Jane, you can switch over to withholding for 2018. Withholding taken from a payment source is credited to the year in which the payment is made, so withholding in 2018 cannot be applied to 2017 tax liability. However, you could start withholding this year and it would be applied to your 2017 tax account. You can also mix withholding and quarterly estimates if you want to. For example, if you had withholding taken out for the rest of 2017, you may have enough paid in to not have to make your January, 2018 estimate for 2017.
Permalink Submitted by Jane Ackerman on Fri, 2017-08-18 17:07
I understand that I can mix withholding and quarterly estimates if I want to. However, I don’t understand that if I had enough withholding taken out for the rest of 2017, I might have enough paid in to not have to make my January 2018 estimate for 2017. I always thought that when you did quarterly estimates, you had to make a payment every quarter.
Permalink Submitted by Alan - IRA critic on Fri, 2017-08-18 17:22
With estimates, you are credited for the amount paid and when. You do not have to make every payment and if you have already met your safe harbor for the year from what was already paid with prior estimates or withholding you do not need to make more payments.
Permalink Submitted by Alan - IRA critic on Fri, 2017-07-07 23:13
No difference for the estimated tax payments or underpayment penalty rules, but if the stock sale produces long term gains, the taxes due will be at a lower rate. And if you have a loss, the loss will offset other gains and ordinary income can be offset up to 3,000.
Permalink Submitted by Jane Ackerman on Tue, 2017-08-15 16:44
I would like to stop using the estimated taxes and increase the withholding from pensions, SS and Rollover Ira distributions as I am no longer working. Could I do that starting in 2018 without any penalty for no longer using estimated taxes?
Permalink Submitted by tomd37 on Tue, 2017-08-15 19:02
As you might already know, withholding from SS benefits can only be a certain percentage; specifically 7, 10, 15 or 25. My wife and I have tax withheld from our SS benefits. Also when I take my RMD about this time of year I calculate my estimated federal tax owed for the year and have just enough withheld to bring any amount due or refund amount to as close to zero dollars as I can (within reason). I prefer to owe a small amount when filing so that if someone happened to steal and use one of our SS numbers, any refund would not be held up. I had a friend whose SSN was stolen and used on a fraudulent tax return and it took him 11 months to get his federal refund. Tom D.
Permalink Submitted by Alan - IRA critic on Tue, 2017-08-15 19:32
Jane, you can switch over to withholding for 2018. Withholding taken from a payment source is credited to the year in which the payment is made, so withholding in 2018 cannot be applied to 2017 tax liability. However, you could start withholding this year and it would be applied to your 2017 tax account. You can also mix withholding and quarterly estimates if you want to. For example, if you had withholding taken out for the rest of 2017, you may have enough paid in to not have to make your January, 2018 estimate for 2017.
Permalink Submitted by Jane Ackerman on Fri, 2017-08-18 17:07
I understand that I can mix withholding and quarterly estimates if I want to. However, I don’t understand that if I had enough withholding taken out for the rest of 2017, I might have enough paid in to not have to make my January 2018 estimate for 2017. I always thought that when you did quarterly estimates, you had to make a payment every quarter.
Permalink Submitted by Alan - IRA critic on Fri, 2017-08-18 17:22
With estimates, you are credited for the amount paid and when. You do not have to make every payment and if you have already met your safe harbor for the year from what was already paid with prior estimates or withholding you do not need to make more payments.
Permalink Submitted by Jane Ackerman on Fri, 2017-07-07 22:05
The increase in Income will be the result of selling some shares in a Brokerage Account. Does this make a difference?
Permalink Submitted by Alan - IRA critic on Fri, 2017-07-07 23:13
No difference for the estimated tax payments or underpayment penalty rules, but if the stock sale produces long term gains, the taxes due will be at a lower rate. And if you have a loss, the loss will offset other gains and ordinary income can be offset up to 3,000.
Permalink Submitted by Jane Ackerman on Tue, 2017-08-15 17:13
The stock sale did produce long term gains going back to 2008. I will be using the average cost basis to calculate the taxes due.