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Originally Posted by Bill14564
Withholding triggers safe harbor rules when determining if there is an under-payment penalty.
Accurate calculation of estimated taxes avoids penalties also but that relies on the investment company to be timely and accurate - once was enough for me.
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Withholding doesn't trigger anything. An underpayment of required taxes triggers the underpayment penalty calculation. I prefer my clients use withholding - such as from their social security checks - rather than quarterly payments. Two reasons: 1. they sometimes forget their quarterly payments 2. Withholding is treated as paid in equally during the whole year even if the withholding is started mid year.
Clients sometimes project they will have less taxable income so they lower their quarterly estimates. But then they get a windfall - i.e. lottery winnings - and they'll be in a penalty situation. Simply increase or start withholding on income items that didn't have withholding.