The safe harbor rule: how to never owe an underpayment penalty

What the rule says

You avoid the underpayment penalty if your payments during the year add up to at least 90 percent of this year's tax, or 100 percent of last year's tax, whichever is smaller. If last year's adjusted gross income was over $150,000, the second figure is 110 percent.

Why it helps freelancers

Your income moves around. Safe harbor lets you pay a known amount based on last year's return and stop worrying about a big month in November. You may still owe tax in April, but you will not owe a penalty on top of it.

How Ashford uses it

When you connect last year's return, Ashford works out your safe harbor figure and shows whether each quarter meets it. If this year is running lower than last year, it shows the smaller of the two so you do not overpay.