Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Oct 11, 2022 12:29:24 PM

Is the 90% safe harbor rule to avoid underpayment penalties and interest based on federal income tax only or does it include social security and medicare taxes withheld?

A portion of my income had social security and medicare taxes withheld but not federal income taxes.  In order to determine if I need to make an estimated payment to avoid underpayment penalties I am trying to figure out how exactly the 90% safe harbor number is calculated - i.e., do I need to pay 90% of the federal income tax I will owe or is it 90% of the total federal tax I will owe (including social security and medicare)?

0 2 849
1 Best answer
Level 15
Oct 12, 2022 6:10:42 AM

Unless you are self-employed or have some other reason that you would owe Social Security or Medicare taxes (or the equivalent self-employment tax) with your tax return, you will not owe either of these taxes with your tax return.  The amount of Social Security and Medicare taxes withheld may or may not be a factor in determining your balance due because in some situations more of these taxes can be withheld from your pay than you actually owe and the excess will end up as a credit toward your income tax liability.  For many people, though, the tax liability and balance due determined on their tax return will not involve anything to do with Social Security and Medicare taxes.

 

Satisfying the 90% rule simply means that the balance due is no more than 10% of the tax liability determined on your tax return.

2 Replies
Level 15
Oct 11, 2022 3:36:22 PM

The 90% "rule" encompasses all of the federal taxes you owe.

Level 15
Oct 12, 2022 6:10:42 AM

Unless you are self-employed or have some other reason that you would owe Social Security or Medicare taxes (or the equivalent self-employment tax) with your tax return, you will not owe either of these taxes with your tax return.  The amount of Social Security and Medicare taxes withheld may or may not be a factor in determining your balance due because in some situations more of these taxes can be withheld from your pay than you actually owe and the excess will end up as a credit toward your income tax liability.  For many people, though, the tax liability and balance due determined on their tax return will not involve anything to do with Social Security and Medicare taxes.

 

Satisfying the 90% rule simply means that the balance due is no more than 10% of the tax liability determined on your tax return.