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"safe harbor"? Haven't heard of it, care to explain?

Greetings, blackmare, I would try to explain but for fear of getting it wrong, I will refer you to the Tax Strategies board on the Fool. Essentially, "safe harbor" is payment of a certain minimum amount of tax during each quarter of the current tax year that sums up to an amount exceeding what you owed in taxes for the previous tax year. It is a way for the IRS to insure that as your income rises, they share in the windfall in a timely fashion throughout the tax year so that you are not sitting on a fat pile of tax that you pay all at the end. You are supposed to pay, spread throughout the year, a minimum of something like 90-100% of the prior year's tax liability, in a year when your income rises significantly over the prior tax year.

But since I am frankly fuzzy on the details (even though it applies to me!), I recommend hopping over to the Tax Strategies board where the good folk there are very helpful and very clear about explaining how to establish safe harbor and how to adjust your withholdings and make estimated quarterly tax payments, if it comes to that. Good luck!

xraymd


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