Calculating safe harbor amount for quarterly estimated tax

[TM999]

Hello!

I'm going to be involved in a stock sale (company being acquired) next week that's going to complicate my 2021 taxes tremendously. I plan to hire a CPA, but given the time crunch and the fact this is their busiest time of the year, it's looking like my best bet is to hold off until after 4/15 (or I guess 5/17 now).

That means I need to figure out a Q1 estimated tax payment on my own, and for simplicity I've decided to use the safe harbor method based on last year's taxes so I can at least avoid penalty. I think I understand the method, but I want to make sure this is right. (I'm not a fisherman or farmer and I don't think any other "special" circumstances apply to me, so let's assume they don't.)

1. Take 110% of my total tax from 2020 (AGI was over $150k), from line 24 of my 1040.

2. Divide by 4

3. Subtract taxes withheld from my paychecks for the first 3 months of 2021 (I'm still a W2 employee with regular withholdings).

The parts in bold relate my main questions.

1. Is line 24 ("total tax") the correct number to use?

2. Am I correct that I can subtract what's already been withheld from my regular paycheck?

3. If yes, would I subtract social security and Medicare tax withheld too, or just federal income tax?

Thank you in advance!

[KathrynG3]

Part 1. Use Line 16, Total Tax instead.

Part 3. Yes, to pay in quarterly estimates, using total tax charged would get you to 110%. 

If you have the employer take out extra withholding within 2021 calendar year directly, then the payments are deemed to have been paid in ratably over the course of the year. There would be less chance of a quarterly charge.

For more information, see: How do I add Form 2210?