Originally Posted by mystang52
DW got a one-time taxable windfall this past January 22. Using an online tax estimator, it appears that we will owe $2500 above and beyond what was withheld. We have automatic withholding for our pensions and S.S., and but for the windfall those withholdings would be very close to our tax obligation.
If I just wait until 2021, and indeed owe $2500, will there be a penalty and would it be substantial? Believe it or not I cannot find a straight answer in Google searching.
Safe harbor will likely apply:
Current year safe harbor: If the estimated taxes you pay turn out to be at least 90% of your final bill for 2020 and you made payments on time, no penalties will apply.
Prior year safe harbor: If you use your 2019 tax bill as a barometer for your 2020 liability, you are likewise sure to be penalty-free as long as the taxes you pay are at least 100% of your 2019 bill. However, if your adjusted gross income for 2019 was more than $150,000 ($75,000 for those who are married filing separately), the 2020 payments must be at least 110% of the 2019 bill. It should be noted that different rules apply to farmers and fishermen.
If you don't meet either of these, then the penalty is minimal. It's around 2.6% annualized and you only pay for part of the year.