Tax Safe Harbor

[TJ100]

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]

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.

[TJ100]

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]

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