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Safe harbor rule – No 1040ES needed if >110% of 2017 total tax withheld?

Home Tax Reduction Safe harbor rule – No 1040ES needed if >110% of 2017 total tax withheld?

  •  pistolpete 
    Participant
    Status: Physician
    Posts: 179
    Joined: 10/14/2016
    WCICon18

    My 2017 total tax due was $13,820. My AGI for 2018 will be more than $150,000.

    In 2018, I was a W-2 employee ONLY from January 1 to August 15th. I started a part-time solo side practice August 15th, with my first 1099 income from that coming in September 2018. Due to business costs I had net loss by the self-employment tax filing deadline of 9/15/18. But now I’m at a profit and wondering if I need to file self-employment estimated taxes by 1/15/19.

    I didn’t think to increase my withholding at my W-2 employer. However, 110% of $13,820 is $15,202, and my W-2 employer has definitely withheld more than $15,202 in federal taxes for 2018 already.

    Does that mean that I meet the safe harbor rule and I don’t need to file 1040-ES for estimated self-employment taxes on January 15th?

    #179330 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6382
    Joined: 01/09/2016

    Yes, you’re ok, as long as you realize you’ll need to pay the full balance due by 4/15/19 and will be required to send in your first quarter estimate. TS Eliot was right when he said that April is the cruelest month.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #179357 Reply
     pistolpete 
    Participant
    Status: Physician
    Posts: 179
    Joined: 10/14/2016

    Yes, you’re ok, as long as you realize you’ll need to pay the full balance due by 4/15/19 and will be required to send in your first quarter estimate. TS Eliot was right when he said that April is the cruelest month.

    Click to expand…

    Thank you, as always, Johanna!

    #179363 Reply
    Liked by jfoxcpacfp
     spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1319
    Joined: 02/01/2016

    You are probably safe, but you should read the Form 1040 instructions on the safe harbor.

    While it is rare that it matters, the tax liability referenced in the safe harbor is not necessarily just your 2017 Line 63 “total tax”. There are adjustments from half a dozen seldom applicable lines.

    #179424 Reply
     pistolpete 
    Participant
    Status: Physician
    Posts: 179
    Joined: 10/14/2016

    You are probably safe, but you should read the Form 1040 instructions on the safe harbor.

    While it is rare that it matters, the tax liability referenced in the safe harbor is not necessarily just your 2017 Line 63 “total tax”. There are adjustments from half a dozen seldom applicable lines.

    Click to expand…

    Interesting. Care to elaborate further? I’ll read the instructions more as well.

    #179637 Reply
     spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1319
    Joined: 02/01/2016

    2018 1040 Instructions, Line 23, Estimated Tax Penalty

    For most people, the “tax shown on your 2017 return” is the amount on your 2017 Form 1040, line 63, minus the total of any amounts shown on lines 61, 66a, 67, 68, 69, and 72; and Forms 8828, 4137, 5329 (Parts III through IX only), 8885, and 8919. Also subtract from line 63 any:

    • Tax on an excess parachute payment,
    • Excise tax on insider stock compensation of an expatriated corporation,
    • Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance, and
    • Look-back interest due under section 167(g) or 460(b).

    When figuring the amount on line 63, include household employment taxes only if line 64 is more than zero or you would have owed the estimated tax penalty for 2017 even if you didn’t include those taxes.

    #179672 Reply
    Liked by pistolpete
     pistolpete 
    Participant
    Status: Physician
    Posts: 179
    Joined: 10/14/2016

    2018 1040 Instructions, Line 23, Estimated Tax Penalty

    For most people, the “tax shown on your 2017 return” is the amount on your 2017 Form 1040, line 63, minus the total of any amounts shown on lines 61, 66a, 67, 68, 69, and 72; and Forms 8828, 4137, 5329 (Parts III through IX only), 8885, and 8919. Also subtract from line 63 any:

    • Tax on an excess parachute payment,
    • Excise tax on insider stock compensation of an expatriated corporation,
    • Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance, and
    • Look-back interest due under section 167(g) or 460(b).

    When figuring the amount on line 63, include household employment taxes only if line 64 is more than zero or you would have owed the estimated tax penalty for 2017 even if you didn’t include those taxes.

    Click to expand…

    None of those apply to me, but thank you for the detailed response. As they say, the devil is in the details!

    #180051 Reply

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