1040 Estimated Tax Voucher

[Mona Song]

Hi,

My client has 2K Federal refund for year 2022 and the return still prints out the form 1040ES 1-4, Estimated Tax Vouchers.

Could anyone advise why? 

My understanding is that it will only print for returns that have balance dues. 

Thank you

Mona

[Just-Lisa-Now-]

Did they make estimated payments for 2022 that created the refund?  Are they high income and should be paying in 110% of their tax?  Follow the money down the 1040ES worksheet.

[Mona Song]

He didn't make estimated payment for 2022 instead, his AGI was 215k with taxes withheld of 39k which created refund of 2k. 

What amount of AGI is considered high income individuals that pay 110% of their tax? 

Even 110% of taxes applies, this is where I was thrown off:

His total tax is $37171 vs total payment of $39413, they got refund. How should I explain to my client why they still need to pay ES payment when they don't owe taxes after the total tax is lesser than total payment. 

Or the total tax being withheld is supposed to be 37171x110% = $40881 by law which is greater than the total payment of $39413, which generates dues of $1475. That's why each ES payment is 1475/4= $369

In fact, after netting the total refund of $2242 and ES payment, he only gets $776 (2242-1475) refund. 

Does it sound right? 

Thank you

Mona

[BobKamman]

Does it print any amount on the vouchers, or are they blank?  Did you maybe check the box on the 1040-ES worksheet, asking that blank vouchers be printed?

[Mona Song]

It printed amount of $369 in each voucher. Not blank amount. 

[TaxGuyBill]

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@Mona Song wrote:

How should I explain to my client why they still need to pay ES payment when they don't owe taxes after the total tax is lesser than total payment. 

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They don't really need to make the Estimated Tax payments. 

BUT you should explain that *IF* there were to owe tax next year, their high income would eliminate one of the 'exceptions' to the penalty, so they may consider making additional tax payments to avoid that possibility.  Estimated Tax payments are one way of doing that, but increasing withholding from their job is usually an easier way to do it (other than figuring out how to fill out the W-4). 

But underpayment of tax penalty would only apply (1) if they owe tax next year, and (2) they don't meet any of the other exceptions to avoiding that penalty.  So if they aren't concerned about it, they can forget about it.

[BobKamman]

It doesn't take much human intelligence to override the artificial intelligence that Intuit has built into the program.  The vouchers are a lighthouse guiding him to a safe harbor.  However, there is no indication that he is lost at sea.  If his income happens to increase substantially this year and his withholding doesn't keep up with it, then he can avoid the ES penalty by making quarterly payments.  Tell him if he sees that happening, he might consider making a payment.

[Accountant-Man]

Precisely what my new partner sent to my old client, and she doesn't understand why she has to pay estimates for 2023.

Software is a tool, but humans still need to review the results.

Even with the 2022 refunds, the software says correctly that 110% for estimates for 2023 will be required. THIS IS YOUR JOB TO MAKE IT BETTER.