I think I should’ve paid $26K in estimated taxes for 2024, but my withholding only adds up to $23K. Can I boost my final paycheck withholding (12/27) by $3K using a W-4 to avoid issues?
Edit: Thanks for the replies so far. To clarify, my 2024 tax bill is much higher than in 2023, so I don’t think safe harbor rules will apply.
Yeah, you can do that.
Yes, withholding is treated like it’s evenly paid across all quarters, no matter when it’s actually done.
Dru said:
Yes, withholding is treated like it’s evenly paid across all quarters, no matter when it’s actually done.
Oh, so the original poster didn’t pay enough quarterly and is using this as a workaround?
If your payroll system can handle it, yes, it’s possible.
What was your 2023 tax bill? You only need to pay the lesser of last year’s taxes or 90% of this year’s to avoid penalties. If your 2023 taxes were higher, you might only need an extra $400 withheld. Alternatively, withdrawing $400 from an IRA by 12/31 with 100% withheld could also work. Then you can settle the rest when you file.
@Zara
This makes sense. I’m in a similar spot. I’m withholding an extra $500 per paycheck to match last year’s taxes and saving the rest for tax day.
Do you know what your tax bill was last year?
Lior said:
Do you know what your tax bill was last year?
Good question. A $3K shortfall might not even be an issue. You could just pay it when you file.
Yes, it’s treated like you paid evenly all year. But technically, you’re not supposed to do that.
You only need around $500 extra to cover 90% of your tax bill—if you’re sure about that $26K number! Overpaying isn’t a virtue, and owing a small balance isn’t a crime.
Perrin said:
You only need around $500 extra to cover 90% of your tax bill—if you’re sure about that $26K number! Overpaying isn’t a virtue, and owing a small balance isn’t a crime.
This deserves a pin for how straightforward it is.
Why not just make an estimated tax payment? The IRS doesn’t care how you pay, as long as you do.
EDIT: Oh, I see the original poster might be using a loophole. I should share this on the forum. People love hearing about IRS hacks.
Are you basing the $26K on your 2023 taxes or your 2024 estimate? If your liability is higher this year, penalties are based on 2023 taxes if you’ve met that threshold. From what you’ve said, I’m guessing your 2023 income was under $150K.
Probably, yes.
That works if payroll updates it in time. But if you meet a safe harbor, there won’t be penalties anyway.
Yep.
LOL. A $3K difference isn’t a big deal. Just file your taxes and send in the payment. Problem solved.
Even if you’re short, the penalty won’t be huge. I owed $7K one year, and the penalty was less than $100. Not worth stressing over.