From IRS website regarding avoiding a penalty. I am a W2 employee, upped my 401K contribution and ran a foul of these rules. I ended up making an estimated tax payment for the 4'th Qtr. It is not clear to me if making an estimated tax payment for the 4'th Qtr avoids the penalty or if Quarterly filing would have been necessary. Assume when the rule states "you paid" they mean you paid them within some time frame of earning them vs waiting until 4'th Qtr. Seems odd changing 401k contributions could result in having to pay a penalty.
Avoid a Penalty
To avoid a penalty, pay your correct estimated taxes on time. Find how to figure and pay estimated taxes.
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:
Your filed tax return shows you owe less than $1,000 or
You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.
Statistics: Posted by bb — Wed May 08, 2024 8:46 pm — Replies 12 — Views 616