Safe Harbor?

As for many others, my 2009 income was drastically reduced compared to 2008. As a consequence my tax is very low. The estimated tax paid for 2009 was significantly greater than my tax liability.
I remember something about a "safe harbor" level of estimated tax payment (for 2010). If I pay 110% of my 2009 tax for 2010 estimated tax, I will be off the hook even if my 2010 income is (hopefully) significantly in excess of my 2009 income.
Do I remember correctly? Am I just wishful thinker?
Bill
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An old man would be better off never having been born.

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It's right and partially wishful thinking.
For federal you're right. If your 2010 AGI is low enough the prior year safe harbor is just 100% of last year's income.
But here's where it is wishful. For California, if your 2009 or 2010 AGI is above $1,000,000, you cannot use prior year safe harbor. I think this law was introduced for 2009, and it in effect for 2010 as well. For New York, they still allow prior year safe harbor, but you have to recompute your prior year tax using the new rates that went into effect in 2009 (they added two new rates 7.85% and 8.97%).
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wrote:

tax,
Furthermore, California has messed with how much is due at each payment, to accelerate more money received earlier. It's no longer 25% at each due date.
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wrote:

True. But it used to be that you had to pay 22.5% each quarter (not 25%). Now it is 27, 27, 18, 18. Still adds up to 90%.
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snipped-for-privacy@yahoo.com wrote:

http://www.lexology.com/library/detail.aspx?g ÿ293978-bef0-4fd2-85dc-e077de843df0
"California's budget issues have sparked yet another change in the estimated tax payment schedule for individual and corporate taxpayers. Historically, taxpayers were required to pay estimated tax in equal quarterly installments. In an effort to accelerate revenue, California revised this payment schedule for taxable years commencing on or after January 1, 2009, to 30% for the first two quarters and 20% for the last two quarters. The payment schedule has been revised once again for taxable years beginning on or after January 1, 2010, to 30%, 40%, 0%, and 30% for the first through fourth quarters."
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wrote:

The percentages 30,30,20,20 seem to be if you want to pay 100% of your tax. The rule is that you only have to pay 90% of your tax without incurring the wrath of the FTB, and hence 27,27,18,18. See line 15 of page of form 5805 http://www.ftb.ca.gov/forms/2009/09_5805.pdf .
For 2010, it looks like the second quarter estimated payment goes up, although the third quarter payment is zero. Thanks for pointing out. Who knows; they might even remove the 90% rule, requiring that you pay 100% of this year's tax through estimated payments.
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It's 100% of last year's tax if your AGI last year was less than $150,000, otherwise it's 110%, otherwise you remembered right..
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Yet another form of marriage penalty. Limit is 150k for single and married filers.
It's 75k for married filing separately. Not sure why MFS always get penalized.
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wrote:

Because the Democratic Congress would rather pay for your lifetime incarceration after you KILL your spouse as an alternative to divorce! ;-)
I'm awaiting a clever but snide remark from our moderator on this one....
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Seems consistent with the pro-shack-up provisions of §121.
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Stu
http://downtoearthlawyer.com
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On Mar 27, 10:02 am, Salmon Egg wrote:

If your state has an income tax make sure you check to see what it's requirement is. For example, MD is 110% of last year's tax regardless of last year's income.
Phil Marti VITA/TCE Volunteer
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A few more things:
(F1) If you're a farmer or fisherman, you only have to pay the smaller of 100% of last year's income or 66 2/3% of this year's income -- for the rest of us, the rule is the smaller of 100%/110% of last year's income or 90% of this year's income. So can I grow a few tomatoes and call myself a farmer to take advantage of this sweet rule? The instructions for 2210-F say that 2/3 of your gross income must come from farming or fishing.
(F2) Also, if you don't make estimated payments and file and pay your tax by March/1, then there is no underpayment penalty. This rule is only for farmers and fisherman.
(Q1) In general, there is a new rule for 2009. If you have a qualified small business, you have to pay the smaller of 90% of last year's income or 90% of this year's income. Not sure if this rule is there in 2010.
Qualified individuals with small businesses.
* Your AGI in 2008 was less than $500,000 ($250,000 if married filing separately in 2009). * More than 50% of your gross income in 2008 was from a small business, which is defined as a trade or business in which you were an owner during the calendar year 2008 and that averaged less than 500 employees for 2008.
(D1) There is a waiver of penalties for federal disaster areas. If a disaster happens in June, the March/15 or April/15 estimated payment due date is not postponed, but the June/15 and later ones may be. It is not necessary to file form 2210.
(D2) Even if it's not a federal disaster, you may still have a waiver of penalties.
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