I was annoyed that the online calculator I previously used to estimate my taxes wasn’t updated for 2024 tax data. So I decided to just build one myself. I wanted it to be simple and quickly answer roughly how much I might owe the IRS when I file my taxes.
Bravo and kudos to you for building this tool. Getting precise tax estimates can be really difficult without specialized software or outside help, especially if you're implementing strategies that can significantly affect your taxes, like charitable giving, Roth conversions, exercising ISO/NSO, etc. One thing I'd mention is that nailing down your expected tax bill does more than just help you avoid penalties, it factors into your cash, investment, and financial planning strategies as well. For instance, if you don't know your tax bill precisely -- even if you are making quarterly payments large enough to meet the safe harbor -- you still may feel compelled to hold a lot of cash on the sidelines for any additional tax you could owe at tax filing. The more precise you can get about what you owe ahead of time, the better you can put your capital to use throughout the year, whether that's simply investing more, or buying property, renovating, etc.
Penalties are only calculated against the safe-harbor limits and not the actual taxes owed, right? If my estimated payments + w2 payments are within 110% of prev year's taxes then there is no penalty right?
My understanding is that you wouldn't have underwitholding penalties as long as your paid (via W2 withholdings or direct payments) 110% of the prior year total tax obligation.
Bravo and kudos to you for building this tool. Getting precise tax estimates can be really difficult without specialized software or outside help, especially if you're implementing strategies that can significantly affect your taxes, like charitable giving, Roth conversions, exercising ISO/NSO, etc. One thing I'd mention is that nailing down your expected tax bill does more than just help you avoid penalties, it factors into your cash, investment, and financial planning strategies as well. For instance, if you don't know your tax bill precisely -- even if you are making quarterly payments large enough to meet the safe harbor -- you still may feel compelled to hold a lot of cash on the sidelines for any additional tax you could owe at tax filing. The more precise you can get about what you owe ahead of time, the better you can put your capital to use throughout the year, whether that's simply investing more, or buying property, renovating, etc.
Penalties are only calculated against the safe-harbor limits and not the actual taxes owed, right? If my estimated payments + w2 payments are within 110% of prev year's taxes then there is no penalty right?
My understanding is that you wouldn't have underwitholding penalties as long as your paid (via W2 withholdings or direct payments) 110% of the prior year total tax obligation.