If you expect that you'll owe money when you file your 2012 tax return next spring, you can avoid an underpayment penalty by boosting your withholding now.
You needn't pay every penny of the tax you expect to owe. As long as you prepay 90% of this year's tax bill, you're off the hook for the penalty. Or you can escape its reach, in most cases, by prepaying 100% of last year's tax liability. However, note that if your 2011 adjusted gross income topped $150,000, you'll have to prepay 110% of last year's tax liability to avoid a penalty.
Taking these steps to boost your withholding at year-end will shield you from an underpayment penalty on your 2012 return, no matter how much you actually owe when you file your return.
If you have both wage and consulting income and expect to owe money on your tax return, you'll do better by boosting the taxes withheld from your last few paychecks rather than trying to make up the shortfall with your final estimated quarterly payment, due January 17, 2013.
Taxes that are withheld are treated as if they were spread out evenly throughout the year, so that approach sidesteps an underpayment penalty; the estimated-tax-payment approach does not.
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