Here is a direct excerpt from the IRS publication:
Penalty for underpayment of estimated tax
If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers, fishermen, and certain higher income taxpayers. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.
There is no qualifier to the Safe Harbor rules. My question still stands - why doe the TurboTax program not use the Safe Habor rules to determine if a penalty is required or not???????????????????????
I again show the Safe Harbor rules - I exceed the 90% rule and in my case the 110% rule:
Estimated tax payment safe harbor details
The safe harbor estimated tax has three components, which we’ll outline here.
Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if:
- You pay at least 90% of the tax you owe for the current year, or 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
This rule is altered slightly for high-income taxpayers. If the Adjusted Gross Income (AGI) on your previous year’s return is over $150,000 (over $75,000 if you are married filing separately), 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.
