More on Estimating Taxes - This time for the Wealthy

Here is a short note for the wealthy taxpayers in California. To most of us this does not apply.

Many are familiar with the "safe harbor" tactics to avoid penalties for under payment of our estimated taxes. Some are a bit tricky to predict, except for the one that compares our estimated taxes to the total tax liability of the prior year. For most of us that hurdle is 100% of the prior year. For those in the upper class it is 110% of the prior year's tax liability.

But now there is a new group - those with income over $1,000,000. Beginning with 2009 there is no longer a California safe harbor by comparing to last year. If you hope to avoid under payment penalties, you must make payments exceeding 90% of your current year's tax bill (which you do not know yet).

And as always, at all levels of income, you cannot just wait until April to pay last year's taxes and avoid those penalties. It must be paid through out the year at the current required rate (which seems to change each year in California!).

Good luck!