The IRS requires annual payments of 90% of the tax shown on the current year return or 100% of the tax shown on the prior year return (the percentage is increased to 110% for taxpayer’s with an Adjusted Gross Income of over $150,000). We typically setup estimates based on the prior year return as those figures are readily available.
Estimated tax payments are setup when it is apparent that your current withholdings are not sufficient enough to meet your annual payment obligation. If the estimated tax payments are made timely, you are protected from additional penalties when filing your return. If you choose not to make these payments or are late with the payments, you may be subject to an underpayment tax penalty and an underpayment of estimates penalty.