Author Topic: Taxes: Safe harbor provision problem - help?  (Read 830 times)

secondcor521

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Taxes: Safe harbor provision problem - help?
« on: December 28, 2012, 05:34:03 PM »
Hi all.

My oldest child is hopefully going off to college next fall, so in preparation for the FAFSA I filled out a preliminary estimated tax return.

I thought I was on track with my withholding, but I apparently was not because of higher income and the fact that my oldest no longer qualifies for the child tax credit, and because I took some unplanned capital gains this month due to the fiscal cliff stuff.

I think I may be on the hook for a tax penalty because I don't meet the safe harbor provisions.  My underpayment is more than $1,000.  I did not pay 90% of my current year tax liability.  I also did not pay more than 100% of my last year tax liability.

Does anyone know of any method to (legally, of course) avoid the penalty now?  My last paycheck has already been processed, so I can't up my withholding.  Can I send in an estimated tax payment and make it count for 2012 somehow?  Other ideas?

2Cor521

lhamo

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Re: Taxes: Safe harbor provision problem - help?
« Reply #1 on: December 28, 2012, 05:43:08 PM »
I had an issue with underpayment of tax in a year I got a grant for professional training -- didn't realize until early January that it was taxable (all my previous grants had been when I was a full-time student, so they were mostly non-taxable).  I figured out my estimated tax and sent in the payment by January 15th, IIRC -- I don't think I was assessed any penalties or interest.  Worth a try, at any rate, and shows you are trying to put things right as soon as you realized the error.

lhamo

Jamesqf

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Re: Taxes: Safe harbor provision problem - help?
« Reply #2 on: December 28, 2012, 09:52:51 PM »
Don't know what the situation is when you're a salaried employee, but as self-employed I file estimated tax (Form 1040-ES).  You've got until January 15th to make an estimated tax payment for this year.  I would think (totally unprofessional opinion, though) that if the capital gains are at all significant, then filing estimated tax would actually be the correct thing to do.

secondcor521

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Re: Taxes: Safe harbor provision problem - help?
« Reply #3 on: December 28, 2012, 11:25:45 PM »
It looks like you guys are right.

I can apparently make an estimated tax payment before January 15th and put it down on my taxes and it looks like I will avoid the penalty.

Thanks all!

2Cor521