Income Tax Question

In the past we always paid our estimated taxes based on our taxes from the previous this year. That way we didn’t have to worry about paying a penalty if we underestimated them and if we overestimated them the surplus would be credited to our taxes for the following year.

I paid the first two quarters of estimated taxes based on that formula while my husband was still alive but I am not sure about what to do about the the third quarter for a few reasons. Last year my husband received pension checks from when he was a crime lab director for the entire year but this year he only received them for five months because that benefit ended when he died. Last year both of us received social security checks for the entire year but this year he only received them for five months. Last year we had capital gains but this year I sold a limited partnership he had in an energy company at a significant loss because it owns the keystone pipeline. Consequently, its outlook is grim. Since I sold it while he was still alive the cost basis will be what he paid for it a number of years ago. In addition, after my husband exhausted his Medicare benefit for the skilled nursing facility I had to pay 13,000 a month for it and that is tax deductible.

This is my question. If I pay the other two quarters of estimated taxes based on last years taxes I will definitely overpay. Since this year I will be filling taxes as the surviving spouse of a married couple and next year I will be filing taxes as a single person will an overpayment from this year for both of us be able to be applied to my taxes as a single person next year. If not would his name be included in a refund check because if that happens I won’t be able to deposit it.

I called my accountant to ask him these questions but he is on a medical leave so I won’t be able to ask him before the September estimates are due.

I don’t know the answer to that question. However, I would recommend that you post it on the new Clark Howard board.

Former CHB poster ClydeWolf is posting there, and he is very knowledgeable on tax matters. If you tag him in your message, I bet he will reply.

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We’re sorry for your loss…

No idea whether you should pay so-called “estimated” tax. I think in that situation I would not, but with Biden’s new hordes of gestapo agents funded they might not be friendly.

On the refund of overpayment, two thoughts come to mind. One is you surely had at least one joint account wherein to deposit a check if you get it. I have one of those to this day; late wife croaked over 4 years ago.

Second thought is automatic deposit. I hate giving them my bank account number but the bottom line is that the government knows every account you have and can take any of your money they want any time. Bean counter talked me into using it. Refund just goes back in.

Third thought is do not ask for a refund! Request that overpayment be credited to pay the tax on your subsequent purported “income.” I routinely leave some, just to be able to show that I was overpaid the entire time.

Hope this helps…

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BM, one can avoid an underpayment of estimated taxes penalty by meeting one of these criteria:
Pay at least 90% of the tax you owe for the current year, or
Pay at least 100% of the tax you owed for the previous tax year, or
You owe less than $1,000 in tax after subtracting withholdings and credits

If your Adjusted Gross Income (AGI) on your previous year’s return is over $150,000 (married), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.

You need a rough estimate of your 2022 income and estimate your 2022 taxable income, and your tax. Since you have indicated that your income this year will be less than 2021, and you’ve paid two quarters based on last year, your estimated payments in the next two quarters can be reduced so you meet one of the criteria.

If you should overpay, you can apply the overpayment to 2023 (due to filing a joint return for 2022). and then skip any estimated payments of that amount that would otherwise be due. I did that more than once.

This is what the IRS says about filing.

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