GLOSSARY · TAX & ESTATE
Estimated tax safe harbor
The rule that protects you from the underpayment penalty if withholding and timely estimated payments reach the smaller of 90% of this year's tax or 100% of last year's tax (110% when last year's adjusted gross income was above a set level). Payments are due in four installments, and withholding counts as paid evenly through the year.
Also called: quarterly taxes, 110% rule
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CHAPTER · TAX PLANNING FUNDAMENTALS · FOUNDATIONSWithholding and Quarterly Estimated TaxesRELATED TERMS
SOURCES
- Topic no. 306, Penalty for underpayment of estimated tax. Internal Revenue Service.
- Publication 505, Tax Withholding and Estimated Tax. Internal Revenue Service.