To avoid the penalty you must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
- 2. You expect your withholding and credits to be less than the smaller of:
90% of the tax to be shown on your current year’s tax return, or
100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
To clarify, does "You expect your withholding and credits" indicate adding the Witholding amount to the Credit Amount. So if I paid 7000 in taxes, and my credit is 3750, this factor would equal 10,750. Thanks again.