“The idea behind estimated payments is to pay just enough to avoid an underpayment penalty, but don’t pay any more than you need beyond that,” said Tim Steffen, director of advanced planning at Baird Private Wealth Management.
To avoid having to pay a penalty, you want your total payments for the year to be equal to either: 90 percent of your actual 2018 tax liability or 100 percent of your actual 2017 tax liability — whichever is less.
If your adjusted gross income in 2017 was more than $150,000, you should shoot for 110 percent instead of 100 percent.
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“If you hit one of those two targets, it doesn’t matter what you’ll have to pay when you actually file your return,” Steffen said. “You generally won’t be subject to a penalty.”