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Safe Harbor With Holding Penalty When You File with an Extension

I know that the IRS gives you safe harbor from the under withholding penalty if you paid at least 100% of the tax owed in the prior year or 90% of the tax owed in the current year.  Do these exceptions also apply if you will be requesting an extension and filing later? 

 

I know that my withholding for the 2023 tax year is at least 100% of what I owed for the 2022 tax year.  I will be requesting an extension and filing later because I am waiting for a form K-1 from the executor of my sibling's estate.  Since my with holding meets the 100% requirement will I have no penalty due if my with holding did not cover what I owe for 2023, and I have to make an additional payment when I file the return after April 15th but before the October deadline?

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1 Best answer

Accepted Solutions
JohnB5677
Expert Alumni

Safe Harbor With Holding Penalty When You File with an Extension

You must make a payment by April 15th that will bring you up to 90% of your current years (2023) taxes.

  • The 100% of your previous year (2022) will cover you up to April 15th.
  • After April 15th the other rules kick in.
  • Please see this article on Filing an Income Tax Extension, see the section on Need to use a credit card to pay taxes owed?
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6 Replies
JohnB5677
Expert Alumni

Safe Harbor With Holding Penalty When You File with an Extension

You must make a payment by April 15th that will bring you up to 90% of your current years (2023) taxes.

  • The 100% of your previous year (2022) will cover you up to April 15th.
  • After April 15th the other rules kick in.
  • Please see this article on Filing an Income Tax Extension, see the section on Need to use a credit card to pay taxes owed?
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Safe Harbor With Holding Penalty When You File with an Extension

Thank you!! 

Safe Harbor With Holding Penalty When You File with an Extension

that 100% is 110% if your 2022 adjusted gross income was over $150k (1/2 that if married filing separate). taxes are due  on 4/15.so you would be safe from underpayment penalties if you meet the safe harbor tests. However, any balance owed and not paid by 4/15 is subject to late payment penalties and interest, 

Safe Harbor With Holding Penalty When You File with an Extension

Thank you!

Safe Harbor With Holding Penalty When You File with an Extension

I assumed that I would have been required to make the payment by the 16th of January, 2024 (last date for estimated payments for 2023).  I'm glad there is still time.  I always make sure to withhold 100% of what I owed in the previous year.  However, I am in a jam this year:  I have to file late because I am awaiting a k-1 from a family member's estate, and did not withhold at least 90% of what I'll owe for this year.

 

 I went to the link in your reply and read this:

  • If the IRS thinks your estimate of the amount of tax you owe is unreasonable, it may disallow your extension and assess a late-filing penalty.

I wonder how they decide what is unreasonable?

RobertB4444
Expert Alumni

Safe Harbor With Holding Penalty When You File with an Extension

Unreasonable is really the "you should have known better" rule.  If you get a windfall of $80,000 right at the end of the year and don't pay any extra taxes in then you're going to owe a bunch, right?  Because you should have known better.  

 

From everything that you have entered it sounds like your estimates have been very reasonable.

 

@glerbnik84 

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