Paying estimated taxes is a crucial responsibility for many individuals, especially those with income not subject to withholding, such as freelancers, self-employed individuals, small business owners, or those with significant investment income. Failing to pay enough tax throughout the year can lead to penalties, even if you're due a refund at tax time. Luckily, TurboTax makes it relatively straightforward to account for these payments and ensure your tax return is accurate.
Let's dive into a comprehensive, step-by-step guide on how to enter estimated tax payments in TurboTax.
Navigating Estimated Tax Payments in TurboTax: A Step-by-Step Journey
Ready to conquer your estimated tax payments in TurboTax? Let's get started!
Step 1: Accessing Your Tax Return in TurboTax
First things first, you need to open up your current tax year's return in TurboTax.
TurboTax Online Users:
Log in to your TurboTax account.
From your Tax Home, you'll typically see an option to "Continue your return" or "Pick up where you left off." Click on that to dive back in.
If you've already filed for the current year, you'll need to go back into your return by selecting the option to "Add a State" (even if you don't actually plan to add one). This is a common workaround to re-enter your filed return for adjustments or reviewing. Be extremely careful not to make any unintended changes to your filed return if you are just trying to access the estimated tax section for future planning.
TurboTax Desktop Software Users:
Launch your TurboTax Desktop software.
Open the tax file (.tax file) for the current tax year that you're working on.
Step 2: Locating the Estimated Tax Payments Section
Once you're inside your tax return, the next step is to find where to input your estimated tax payments. This section is usually nested under "Deductions & Credits."
For TurboTax Online:
On the left-hand menu, click on "Federal Taxes" (or "Personal" if you're using TurboTax Home & Business).
Then, select "Deductions & Credits."
You'll likely see a screen that asks "Do you want to see all tax breaks?" or similar. Choose to "Explore on my own" or "I'll choose what I work on" to see the full list of categories.
Scroll down until you find the section titled "Estimates and Other Taxes Paid."
Click the "Start" or "Update" button next to "Estimated Tax Payments."
For TurboTax Desktop Software:
At the top of the screen, click on the "Federal Taxes" tab.
Then, select "Deductions & Credits."
Similar to the online version, you'll need to navigate to the "Estimates and Other Taxes Paid" section.
Click on "Start" or "Update" next to "Estimated Tax Payments."
Alternative Method (for both Online and Desktop): You can often use the search bar within TurboTax. Simply type in "estimated tax payments" or "1040-ES" and the system should provide a "Jump to" link that takes you directly to the correct section. This can be a real time-saver!
Step 3: Entering Your Federal Estimated Tax Payments
Once you're in the "Estimated Tax Payments" section, TurboTax will guide you through entering your federal estimated tax payments.
You'll typically see a prompt asking about "Federal estimated taxes for [Current Tax Year] (Form 1040-ES)." Click "Start" or "Update" here.
The subsequent screen will usually present you with fields to enter the amounts you paid for each quarter of the tax year. It's critically important to enter the correct amount for each payment period.
Payment 1 (Q1): Generally due April 15th
Payment 2 (Q2): Generally due June 15th
Payment 3 (Q3): Generally due September 15th
Payment 4 (Q4): Generally due January 15th of the following year
Carefully input the exact amount you paid for each quarter. Even if you made a lump sum payment, you should still allocate it to the correct quarter or quarters it was intended for. If you paid more than the calculated amount for a specific quarter, enter the actual amount you paid.
Double-check your entries! A small typo here can significantly impact your tax calculation.
Step 4: Entering Your State and Local Estimated Tax Payments (If Applicable)
If you make estimated tax payments to your state or local government, TurboTax will also guide you in entering these.
After you've entered your federal estimated payments, TurboTax will typically ask if you made any state estimated tax payments. Select "Yes" and proceed.
You'll then be directed to a similar interface where you can enter the amounts paid for each state and/or local estimated tax payment.
The exact navigation may vary slightly depending on your state, but the process is generally intuitive. Ensure you choose the correct state and enter the payments accurately.
Step 5: Reviewing and Confirming Your Entries
Once you've entered all your estimated tax payments, TurboTax will usually provide a summary screen for your review.
Take your time to meticulously review all the amounts you've entered. Compare them against your personal records (bank statements, IRS payment confirmations, state tax payment records, etc.).
Look for any discrepancies. If you find an error, go back and correct it immediately.
This step is essential for ensuring the accuracy of your tax return and avoiding potential underpayment penalties or missed credits for payments you've already made.
Step 6: Understanding the Impact on Your Return
After entering your estimated tax payments, TurboTax will automatically factor these amounts into your overall tax calculation.
These payments act as credits against your total tax liability for the year.
You'll be able to see how your estimated payments affect your refund or amount due. If you've paid enough, your refund might increase, or your amount due might decrease. If you haven't paid enough, you might still owe taxes, and TurboTax will help you determine if you're subject to an underpayment penalty.
TurboTax also has tools that can help you plan for next year's estimated taxes. Often, after you've completed your current year's return, the software will offer to help you calculate your estimated payments for the upcoming year based on your current income and deductions. This can be incredibly valuable for proactive tax planning.
Tips for Success:
Keep Meticulous Records: Always keep detailed records of all your estimated tax payments, including the date, amount, and method of payment. This will make entering them into TurboTax a breeze and serve as proof if there are any discrepancies with the IRS.
Don't Overlook State/Local Payments: Many people remember federal estimated taxes but forget about state or local ones. Be sure to account for all of them.
Utilize TurboTax's Planning Tools: After you file, use TurboTax's estimated tax calculator or the 1040-ES worksheet provided within the software to plan for the next tax year. This proactive approach can help you avoid surprises and penalties.
Consider Adjusting Withholding: If you also have W-2 income, you might be able to adjust your Form W-4 with your employer to increase your withholding and potentially reduce or eliminate the need for estimated tax payments. TurboTax often has a W-4 calculator to assist with this.
10 Related FAQ Questions:
How to Calculate Estimated Taxes for the Current Year?
You can calculate estimated taxes using Form 1040-ES, Estimated Tax for Individuals, which includes a worksheet. TurboTax also often provides an estimated tax calculator based on your prior year's return and projected current year income and deductions.
How to Know If I Need to Pay Estimated Taxes?
Generally, you need to pay estimated taxes if you expect to owe at least $1,000 in tax for the year, after subtracting your withholding and refundable credits. This typically applies to income not subject to withholding, like self-employment income, interest, dividends, or rental income.
How to Avoid Underpayment Penalties for Estimated Taxes?
To avoid a penalty, your total tax payments (through withholding and estimated payments) during the year must generally be at least 90% of your current year's tax liability or 100% of your prior year's tax liability (110% if your Adjusted Gross Income (AGI) in the prior year was over $150,000).
How to Make Estimated Tax Payments to the IRS?
You can make federal estimated tax payments online via IRS Direct Pay, through your IRS Online Account, using the Electronic Federal Tax Payment System (EFTPS), by debit/credit card (through third-party processors for a fee), or by mail with a Form 1040-ES voucher.
How to Adjust Estimated Tax Payments If My Income Changes?
If your income changes significantly during the year, you should re-evaluate your estimated tax liability. You can use the Form 1040-ES worksheet or TurboTax's planning tools to recalculate and adjust your remaining quarterly payments accordingly.
How to Find Records of My Past Estimated Tax Payments?
You can find records of your past federal estimated tax payments by checking your bank statements, logging into your IRS Online Account, or referring to your prior year's tax return.
How to Determine the Due Dates for Estimated Tax Payments?
Estimated tax payments are typically due on April 15 (Q1), June 15 (Q2), September 15 (Q3), and January 15 of the following year (Q4). If a due date falls on a weekend or holiday, the deadline is the next business day.
How to Handle Estimated Taxes If I'm a Self-Employed Individual?
Self-employed individuals are almost always required to pay estimated taxes, as their income is not subject to employer withholding. These payments cover both income tax and self-employment taxes (Social Security and Medicare).
How to Get Estimated Tax Vouchers from TurboTax?
After calculating your estimated taxes for the upcoming year, TurboTax typically generates and allows you to print pre-filled Form 1040-ES vouchers that you can mail with your payments.
How to Credit an Overpayment from Last Year's Return Towards This Year's Estimated Taxes in TurboTax?
When preparing your tax return, if you have an overpayment, TurboTax will give you the option to either receive it as a refund or apply it as a credit towards your next year's estimated taxes. If you choose to apply it, TurboTax automatically accounts for this when calculating your upcoming estimated payments.