Is the State of California safe harbor similar to federal, 110% of last years tax liability? I intend on increasing withholding to reach this amount for federal and state, and pay the additional taxes on the sale of our primary residence with our tax return. I am collecting all of the information, and work with our tax person to determine the taxable income and tax liability. I don't want to be dealing with this in March when I have had time to forget, am dealing with family members tax returns, and the tax person is buried.
Is the State of California safe harbor similar to federal, 110% of last years tax liability? More or less, yes.It's 100% of last year's tax if your AGI is under $150k ($75k for married filing separate). Over that AGI it's 110% of last year's tax. If your AGI is over $1 million, you don't get this exception. Instead you need a good crystal ball so that you can pay in 100% of your tax. (In reality, at that income level, you have to use annualized installments to avoid a penalty AND keep from grossly overpaying your taxes.)--Peter
I am tired, I was thinking it was AGI for current year's income tax, and not previous years. 100% of last year's tax liability will be sufficient. Withholding should cover the safe harbor. We are no where near the $1 million annual income. A bizarre requirement for California is that with $1M in income, taxes must be paid by electronic transfer. There is a penalty for paying by check.
Instead you need a good crystal ball...This is another thing that infuriates me about the current tax system. DW's job is in the process of undergoing an extreme flux and her income can drop is much as 30%. Or more. Or less. Here is an aside warning about overpaying taxes. ACA/Obamacare. Say you don't chose to participate or your current health coverage doesn't qualify (we might fall into the later catagory), the only way the IRS can currently enforce the penalty is to withhold it from your tax refund.So the old saw about the best tax return is to owe Uncle Sam $1 is gettin more profound.JLC
ACA/Obamacare. Say you don't chose to participate or your current health coverage doesn't qualify (we might fall into the later catagory), the only way the IRS can currently enforce the penalty is to withhold it from your tax refund.At the risk of starting something that more properly belongs in the Land of the Unmedicated, a/k/a Political Asylum, the erstwhile tax collector in me must point out that the fact that the IRS can't make you pay doesn't change the fact that legally you owe it. Choosing not to pay because they can't make you is no different from playing audit roulette because, after all, how are they going to catch me?PhilRule Your Retirement Home Fool
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