If you owe excess tax for 2021 or expect you'll be short on your tax liability in 2022, you will need to adjust your estimated tax payments now. If you wait until the end of the year, you just might be to late.

One good thing is that you need not pre-pay all the tax you might owe for 2022. By law, all you have to pay is 90% of the amount you think you owe or 100% of your 2021 tax liability, (110% if your AGI exceeds $150,000 in 2021). Doing so avoids the underpayment penalty,even if you end up owing the IRS a lot of tax.

Penalty for Underpayment of Estimated Tax

If you didn't pay enough tax throughout the year, either through withholding or by makinjg estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avcid this penalty if they own less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior, which ever is smaller. There arte special rules for farmers, fishermen, and certain higher income taxpayers. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.

Higher Income Taxpayers

 If your AGI for 2020 was more than $150,000 (75,000 if your filing status for 2021 is married filing a separate return), substitute 110% 100%.

For 2020, AGI is trhe amount shown on Form 1040 line 11.