Updated · Built and checked by the PlinzoTools team, formulas tested against published sources
Calculate the minimum you need to pay via withholding and estimated payments to avoid an IRS underpayment penalty.
The IRS charges an underpayment penalty if you don't pay enough tax throughout the year, but you're protected by a safe harbor if you pay at least the lesser of: 100% of last year's total tax (110% if last year's AGI was over $150,000), or 90% of this year's actual tax. Meeting either test alone is enough -- this tool shows both options and the lower (easier to hit) one.
Enter last year's total tax, last year's AGI, and your estimate of this year's total tax. Your safe harbor amount appears instantly.
The tool computes two targets and shows the smaller as your safe harbor amount. The prior-year target is last year's total tax multiplied by 1.00, or by 1.10 when last year's AGI was above 150,000 dollars. The current-year target is 90 percent of this year's expected total tax. The figure displayed is the total you should have paid by the end of the year through withholding and estimated payments combined, not just estimated payments alone. The two individual targets appear beneath the main number so you can see which one is driving the result.
Safe harbor = the lower of (last year's tax x 100% or 110%) and (this year's expected tax x 90%).
Subtract what you expect to have withheld from paychecks over the year from the safe harbor figure. What remains is roughly what needs to come from estimated payments, often split into four installments that fall due in April, June, September and January. The IRS publishes the exact due dates each year. Paying equal installments is the simplest approach, and safe harbor rules judge you on the required payments by quarter, so lopsided payments may produce a penalty even if the annual total is met; the IRS annualized income method exists for people whose income is uneven, and a tax preparer can help there.
This is an educational estimate. Someone with income from several sources, a large capital gain or business fluctuations should consider help from a tax professional.
No -- meeting either one alone protects you from the underpayment penalty. This tool shows the lower of the two, since that's the easier target.
Use your total tax liability from last year's return, not the refund or amount due. Check the relevant line of your Form 1040 or the instructions for Form 2210.
Yes. Tax withheld from wages generally counts in the total, so the estimated payments you need are the safe harbor amount minus expected withholding.
Not necessarily. The safe harbor prevents an underpayment penalty, but if your actual tax is higher than what you paid, you will still owe the difference when you file.
If your prior-year AGI was above the 150,000 dollar cutoff, the prior-year target is 110 percent of last year's tax, which can exceed 90 percent of this year's tax when your tax is stable.
Reference: Internal Revenue Service