All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Valued Pioneer
Posts: 3
Registered: ‎08-10-2017

Quarterly tax payments after switching to full-time?

Throughout this year, I've been self-employed and making quarterly estimated tax payments based off of my tax return from last year. However, I just started a full-time job this week and will now have taxes withheld from my paychecks. In order to avoid a penalty, am I still required to make all four estimated tax payments in equal amounts this year, or can I skip the fourth payment without penalty since taxes are now being taken out of my paycheck? The total amount (estimated payments + withholdings) will be at least equal to the amount I paid in taxes last year, if not more, but I'm not sure how strict the "four equal payments" rule is. Thank you!

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Tax Pro
Posts: 5,617
Registered: ‎02-23-2016

Re: Quarterly tax payments after switching to full-time?

Hi lisaocchino,

 

Welcome to the H&R Block community.

 

If you expect to owe less than $1,000 in taxes overall on your tax return for this year, or if your withholdings + the payments you've already made will cover 90% or more of your tax liability, then you are not required to make any more estimated payments for this year.  Since you have a good amount of withholding now I would calculate your expected tax liability with that taken into account and see where you are at.

 

Also, there is an exception to the requirement to make payments.  If you did not owe any tax when you completed your tax return last year (2016) then you are not required to make payments for this year (2017).

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 3
Registered: ‎08-10-2017

Re: Quarterly tax payments after switching to full-time?

Thanks for your quick reply, Louis! So just to make sure I understand correctly: If the estimated quarterly taxes I've already paid this year + my expected paycheck withholdings between now and December cover at least 90% of my tax liability, then I should NOT make the estimated quarterly tax payment for fourth quarter, and I will not receive any sort of penalty for only submitting three payments instead of four this year?

Tax Pro
Posts: 5,617
Registered: ‎02-23-2016

Re: Quarterly tax payments after switching to full-time?

lisaocchino,

 

You are correct.  90% is the magic number when we're talking about the current year.  If at least 90% of your tax liability is or will be covered by withholdings and tax credits (and in your situation tax payments already made during the year), and if the remaining amount that you still owe with your tax return (if any) is less than $1,000, then you are not required to make estimated payments or make any additional payments.  You will not be subject to an underpayment penalty if you meet these criteria.

 

Just to give you an idea, your total tax liability before applying payments, withholdings, and tax credits would have to be over $10,000 in order for you to still owe more than $1,000 with 90% of your tax already covered.  So for most people whether or not they have to make payments comes down to whether or not 90% of their tax liability for the current year is already covered or will be covered by withholdings and credits.

Tax Pro
Posts: 5,617
Registered: ‎02-23-2016

Re: Quarterly tax payments after switching to full-time?

You're welcome.

Valued Pioneer
Posts: 3
Registered: ‎08-10-2017

Re: Quarterly tax payments after switching to full-time?

Got it, thanks so much! And does this information also apply to state taxes (I'm in New York), or is this just for federal?

Tax Pro
Posts: 5,617
Registered: ‎02-23-2016

Re: Quarterly tax payments after switching to full-time?

You're quite welcome, and I apologize for the delay in answering your most recent question.

 

New York follows the federal rules on a great number of things.  On this issue it is very similar, but not exactly the same.

 

NEW YORK ESTIMATED PAYMENTS

 

Basically there are 3 exceptions to making NY payments.

 

Just like at the federal level, if your withholdings for 2017 will cover at least 90% of your NY tax for 2017 then you do not have to make estimated payments to New York.

 

If (1) your withholdings for 2017 will be equal to or greater than 100% of your NY tax liability from 2016, and (2) your NY adjusted gross income is $150,000 or less then you are exempt from NY payments.

 

If (1) your withholdings for 2017 will be equal to or greater than 110% of your NY tax liability from 2016 and, (2) your NY AGI is greater than $150,000 then you are exempt from making NY payments.

 

I've included a link above that will take you to the NY Department of Taxation page that explains the rules for whether or not you must make estimated payments where you can find all of this information.

 

Of course I'll be here if you have any other questions.

 

Louis