Quarterly taxes

[johnathorner]

After a long career as a salaried employee, I picked up a consulting assignment this past January.  I am paying quarterly taxes using the safe harbor based on last year's W-2 and 401(K)  and Social Security income.    The estimated taxes, $1500 a quarter, will total much less than the 2023 taxes that will be due next April.  Am  I still OK paying the safe harbor amount?

Also, I am not paying any estimated quarterly taxes to the State of Maryland.  Should I be?

[JBedford]

Thanks for your question, @johnathorner !

The safe harbor amount is not an income amount, but a tax amount. It is 100% of your 2022 tax liability from Line 24 of your Form 1040. If you make over $75,000 as a single filer, or $150,000 if married filing jointly, in self-employment income, then it's 110% of that number. You should pay at least that amount, in four equal payments. If you do so, then you will not owe an Underpayment Penalty.

However, that's not to say that you won't have a large tax bill when you file, if your income has grown. There is nothing wrong with that, as long as you have set aside the money to pay it. 

It is likely that you should also be making estimated payments to Maryland. They also offer a 110% safe harbor. 

Hope this helps, please let me know if not!