Thanks for the explanation. So this means that you can surely avoid penalty in 2023 if your payments/pay-stub withdrawals exceed 100/110% of the tax liability of 2022?Calculate the two numbers, use the lesser of the two. Supposed last year's tax was $10,000 and this year's tax will be $11,000. 90% of $11,000 is $9,900 which is smaller than $10,000 so $9,900 is the "smaller of at least 90% of the income tax for the year or 100% of the income tax for the previous year" and is your safe harbor amount for the year.What does it mean when they say “the smaller” of at least 90% of the income tax for the year or 100% of the income tax for the previous year. Can’t wrap my head around this for some reason.
Of course, you don't know with 100% certainty (some of us know with more certainty than others) what this year's tax will be but you do when you file your tax return but whatever the lesser of the two is is the amount that had to be timely paid before 4/15. Any amount beyond that is not subject to penalty.
Note that the 100% of last year's tax is actually 110% if last year's AGI was over $150,000.
Statistics: Posted by Bogle-007 — Tue Dec 05, 2023 9:58 pm — Replies 41 — Views 4448