This year January 15 falls on a Sunday, and the next day we recognize the birthday of Dr. Martin Luther King, Jr. This shuffles the IRS’ due date for estimated tax payments to Tuesday, January 17. Payments due are for the period September 1 to December 31. (Yes, that’s not a calendar quarter! Here’s a helpful article on due dates from taxoutreach.org.)
As always, our approach to taxes includes two key thrusts: first, tax optimization consistent with your plan; and second, timely data to make tax preparation as smooth as possible for your CPA—or you, if you’re a self-preparer. (If you are a self-preparer and getting oriented on estimated taxes, SmartAsset has a good basic explainer. Don’t forget state estimated taxes, too.)
This year, we are providing some additional data, which you and/or your CPA may find helpful in the coming days. The data focuses on portfolio income for 2022. Because 2022 portfolio income was substantially less than 2021, you may be able to lessen or even completely forgo the estimated tax payment due January 17—at least with respect to income relating to your investment portfolio.
Following is more detail on what we’re sending and how it may be relevant.
- Where relevant, we are sharing portfolio income information via ShareFile that’s needed to calculate estimated taxes. For those of you with other non-portfolio sources of income (e.g., wages, RSUs, etc.), you’ll need to share that information with your tax preparers directly.
- We anticipate that most clients who were making “safe-harbor” payments (to avoid paying too little and owing penalties), especially if based on either 100% or 110% of 2021’s taxable income, have likely significantly overpaid what we forecast will be owed for 2022, as you might expect from last year’s broad market declines. Here’s a useful article from TurboTax covering these and some other finer points about estimated taxes.
- If your CPA has provided you with estimated payment vouchers, forgoing the payment is as simple as not mailing the January voucher. This should be done in consultation with your tax preparer, if you work with one. You can review payments made for 2022 through your personal login at irs.gov, if you’ve created one. That account will not show your withholding to-date, however, as that’s reported to you via form W-2.
- When your return for 2022 has been prepared, you may find that you’ve overpaid your 2022 tax liability, perhaps significantly. You’ll then have the option of taking the overpayment as a refund or rolling it to your 2023 tax liability, both of which have merits (and if only the IRS provided interest on pre-payments the way they charge interest on deficits!). We’re happy to help you (and your accountant, if you have one) calibrate between the two options.
If you have any questions, or if you or your CPA finds that any more information may be helpful, please be in touch.