So we have unpredictable earnings, though most of it is realized in the early part of the year when bonus is paid.
I try to have 110% of last year's taxes withheld to meet the safe harbor requirements, though sometimes an estimated payment is due in Q4.
Last year when the Additional Medicare Tax (0.9%) was new, I didn't realize that it counted as part of the withholding until I used HR Block Tax Cut to estimate my penalty if I didn't make a Q4 payment, and found that I didn't have any.
Now I'm trying to calculate 1) What my safe harbor is, and 2) What counts as withholding.
My understanding is that my safe harbor is 110% of Form 1040, Line 61 (Total Tax). This included both the Additional Medicare Tax on wages (Form 8959), and the Net Investment Income Tax (Form 8960).
Is that correct?
Now my paycheck doesn't separate out the Medicare Tax (1.45%) from the Additional Medicare Tax (0.9%), but I can certainly calculate how much Additional Medicare Tax is withheld.
In calculating the total amount withheld, I believe I can include this Additional Medicare Tax (0.9%) in the total.
Is that correct?
As I try to forecast my total income, and adjust my withholding to meet the safe harbor, I just want to make sure I'm doing it correctly.
Thanks in advance.