Quote:
Originally Posted by retiredguy123
That is why I said "usually". If your AGI is above a certain level, you do need to pay 110 percent of your prior year tax. But, if you use a tax software, like TurboTax, the program will calculate the correct amount for you. One year, this happened to me and I thought TurboTax had made a mistake. If you are under the AGI limit, I would not pay the extra amount in estimated tax. Let the tax software tell you how much to pay.
The other method, which I never use, is to pay at least 90 percent of the current year taxes due. This involves a complicated calculation and tracking of your income during the year. It's not worth it to me.
Also, if tax withholding is optional, I never allow someone else to deduct taxes from my income.
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I haven't found (or looked for) that estimation option in the HR Block software. I should look.
The year I retired I chose not to use the 110% method - my income decreased significantly and I wasn't willing to give the IRS that much extra. I built a spreadsheet to perform the 90% calculation to a usable degree. It wasn't perfect but it kept me away from a penalty. You're right though, it is a fairly complicated calculation, requires a lot of input, and needs to be updated each year. Now that my expected income has leveled out, the 100%/110% method is preferable.
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