Submitted By: someone
Answered: April 6, 2021 11:38 pm

What is the safe harbor for avoiding estimated tax penalties for 2020 payments?

If the amount of the underpayment is more than $1,000, you can avoid penalties if you’ve paid at least 90% of the tax liability for the year or 100% of 2019’s tax liability (110% if your adjusted gross income in 2019 was over $150,000, or $75,000 if married filing separately). In 2019, the IRS lowered the 90% threshold to 80%, for 2018 estimates that fell short due to confusion about new income tax withholding rules, but there is no similar reduction for 2020 taxes (nor was there a reduction for 2019 taxes).

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Tax Glossary

Estimated tax

Advance payment of current tax liability based either on wage withholdings or installment payments of your estimated tax liability. To avoid penalties, you generally must pay to the IRS either 90% of your final tax liability, or either 100% or 110% of the prior year’s tax liability, depending on your adjusted gross income.

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