What is the Required annual payment?
The required annual payment is the minimum total federal tax that must be paid through withholding and estimated payments during the year to avoid the underpayment penalty. It equals the smaller of 90% of the current-year tax or 100% of the prior-year tax, with the prior-year threshold rising to 110% when the prior-year adjusted gross income exceeds $150,000. The amount is divided into four installments tied to quarterly deadlines, and shortfalls in any period trigger separate penalty calculations against that quarter. Tax loss harvesting and Health savings account contributions help reduce that base.
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