What would make it so we have to pay quarterly taxes?
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Income not adequately covered by a w2 withholding, coupled with a desire to meet safe harbors for overall withholding.
I end up owing money every year, usually $3-5k. I’m fine with that. Every year TT spits out quarterly tax payment vouchers, suggesting I pay an additional $3-4k quarterly to meet the 110% safe harbor. I ignore them every year. Only one have I failed to meet a safe harbor, and the underpayment penalty was a whopping $50 (on a $7k tax bill).
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I’ve had to pay $2500 each of the past two years and was worried if my tax bill got too high I’d end up with some sort of fee or penalties for not paying quarterly.
Sounds like I’m ok for now. We have plenty in savings.
I believe the IRS looks at both your Quarterly payments and your quarterly income. The later can be “seen” from 1099s in our case. If your income is relatively equal no problem. But if you sell a highly appreciated asset in Q1 (or Q2) the IRS might have a case for claiming you should have paid more.
In our case this is not really a consideration since our largest single source of income is mutual fund capital gains distributions - and those all happen in Q4 for us.
I believe the IRS looks at both your Quarterly payments and your quarterly income.
IRS has limited visibility to when most income occurs during the year. Social Security has some knowledge because of when employers pay Social Security and Medicare taxes. For income that reported on 1099s the detail of when received isn’t sent to the IRS.
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