Estimated Tax Safe Harbor
General Rule
To avoid an underpayment penalty, individuals whose annual tax obligation won’t be met through income tax withholding must make timely estimated payments.
For 2020
There were three payments, due on July 15 (representing the Covid-relief postponement of the April 15 and June 15 payments), September 15, 2020, and January 15, 2021.
For Other Years
There are four payments, due on April 15, June 15, and September 15 of the year to which the payments apply, and January 15 of the following year. As with tax return due dates, if the estimated tax due date falls on a Saturday, Sunday or federally-recognized holiday, the payment is due on the first non-weekend or non-holiday day that follows.
The general rule requires annual payments of the lesser of:
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90% of the current year’s tax, or
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100% of the previous year’s tax.
High Income Safe Harbor
If AGI for the previous year is over $150,000 ($75,000 if filing married separate), the required payment is the smaller of:
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90% of the current year’s tax, or
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110% of the previous year’s tax.
Amended Return
The tax amount to use for the safe harbor test when the prior year return is amended depends on when the amendment is filed. Use the tax amount shown on the:
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Amended return if it is filed by the due date of the original return.
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Original return if the amended return is filed after the original return’s due date. (Exception: if spouses originally filed timely separate returns and then file a joint return after the due date to replace the separate returns, use the tax on the joint return to figure the required estimated tax payments.)
Special Exceptions - Farmers and Fishermen
If at least two-thirds of the taxpayer's gross income for the prior year or the current year is from farming or fishing, the following special exceptions and rules apply:
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The estimated tax underpayment penalty won’t apply if the tax return of the farmer or fisherman is filed, and all tax due is paid, by March 1 (calendar year filers).
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Any penalty owed is figured from the January 15 installment date.
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The taxpayer's required annual payment is the smaller of:
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66-2/3% (.6667) of their total tax for the year, or
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100% of the total tax shown on the prior year return, provided the prior year was for a full 12 months.
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Separate Returns – Separate Estimates
If the taxpayer and spouse made separate estimated tax payments for the year and file separate returns, they can take credit only for their own payments.
Separate Returns – Joint Estimates
If the taxpayers made joint estimated tax payments, they must decide how to divide the payments between the returns. One spouse can claim all of the estimated tax paid and the other none, or they can divide it in any other way they agree on.
If they cannot agree, they must divide the payments in proportion to each spouse's individual tax as shown on their separate returns for the year.
Divorced Taxpayers
If the taxpayers made joint estimated tax payments for the year and were divorced during the year, either spouse can claim all the payments or they each can claim part of them. If the taxpayers cannot agree on how to divide the payments, they must divide them in proportion to each spouse's individual tax as shown on their separate returns for the year.