Pay the safe amount and skip the estimated tax penalty

Miss the safe harbor amount and the estimated tax penalty builds on every short quarter while interest on unpaid tax grows daily.

Call a tax pro now · (833) 859-3657

A licensed tax pro works out your safe harbor amount from last year's return, 24/7, free review.

You pay your own taxes during the year and want no penalty next April. The safe harbor rule for taxes says you are safe if you pay the smaller of 90% of this year's tax or 100% of last year's. If a penalty already came, a tax pro can check the waiver for you.

• 110%

  If last year's AGI was over $150,000, the last-year test is 110%, not 100%.

  So high earners need a bigger cushion to be safe.

  Next: Check line 11 of last year's return before you set payments.

• 4 dates

  Payments are due April 15, June 15, September 15 and January 15.

  So one late payment adds a little interest for the days it was late.

  Next: Put all four dates in your calendar today.

The rule in plain words

With $14,000 of tax last year and about $18,000 expected this year, the safe amount is the smaller of $14,000 and $16,200, which is $14,000.

The IRS estimated tax penalty page lists the tests. You have no penalty if you owe less than $1,000 when you file. You also have none if what you paid during the year reached the smaller of two numbers.

• 90% of the tax on this year's return.
• 100% of the tax on last year's return, or 110% if last year's AGI was over $150,000 ($75,000 if married filing separately).

Which number to use

Last year's number is the one you can know in advance. That is why most people plan around it. It also protects you if your income jumps.

If last year's AGI had been over $150,000, the 110% test would give $15,400. The four payments would then be $3,850 each.

The four due dates

The IRS splits the year into four uneven periods. The IRS page lists these dates:

How to set it up

1. Call a licensed tax pro to review the safe harbor.
2. Find last year's total tax on your return.
3. Multiply it by 100%, or 110% if your AGI was over $150,000.
4. Subtract the tax you expect to have withheld from pay or a pension.
5. Divide what is left by four and pay it by each due date.

If you have a job too, the IRS estimated tax FAQ notes that more withholding can do the same job. Check the numbers below, then see the underpayment penalty page if a bill already came.

For any other penalty, start at IRS penalty removal.