Tax Safe Harbor

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If I took out a Annuity Distribution in January and had both State and Federal Taxes withheld such that they covered more than 100% of my Tax Liabilities of the prior tax year, does this satisfy the Safe Harbor provision (even though I did not make any estimated taxes and will now owe thousands more but in this provision I can wait until next year to pay / make further estimated payments)?

DaveF1006

Alumni - Intuit

According to the IRS, You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

You had no tax liability for the prior year
You were a U.S. citizen or resident alien for the whole year
Your prior tax year covered a 12-month period

Also, individuals, including sole proprietors, need to pay estimated taxes if they expect to owe tax of $1,000 or more when their return is filed. in your case, if you expect to owe more than $1000 for year 2023, you will need to pay estimated taxes to avoid the penalty.

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TJ100Author

Level 2

Note,

I made a distribution in January and had the federal taxes withheld that were MORE than 100% of the previous years Taxes owed so, I assume this means I am now into the "Safe Harbor" provision and are no longer required to pay any estimated taxes - and even though I will owe thousands more in federal taxes at the end of this years tax year, , I will not get any penalty for owing them since I have already meet the Safe Harbor provision by having paid more than 100% of the previous years taxes owed.

Am I not correct?

MaryK4

Alumni - Intuit

That is correct, you will not incur the penalty if you paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. @TJ100

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