Why am I charged a penalty for not paying enough tax when I elected to pay the safe harbor route?

You have to meet the requirements of the safe harbor rules in order to avoid the penalty. The safe harbor for estimated taxes has basically three components.

In general, an underpayment penalty can be avoided if you use the safe harbor rule for estimated tax payments as follows: 

The IRS will not charge you an underpayment penalty if the following is met:

 

• You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owe for the previous tax year, or
• You owe less than $1,000 in tax after subtracting withholdings and credits

For high-income taxpayers, the rule is slightly different. If the Adjusted Gross Income on your previous year’s return is over $150,000 (over $75,000 if you are married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.

 

Your state will also have their own estimated tax payment rules that may differ from the federal rules.

 

Click here for Estimated Taxes: How to Determine What to Pay and When

Click here for Underpayment of estimated tax by individuals penalty