Before the Year Ends, Do You Know If You’ve Paid Enough in Taxes?

Written By Keith Kiker

There are still a few months left in the year. You may know roughly what you’ve earned. You probably know what has been withheld from your paycheck.

But do you know whether you’ve paid enough in federal taxes to avoid an underpayment penalty?

It is not the most exciting item on a fall financial checklist, but it can be an important one, especially if your income looks different this year.

A large bonus. An RSU vest. The sale of a business or investment. A significant change in income.

Any of these can change the tax picture. Before December arrives, it may be worth checking where you stand.

Start With the Safe Harbor

The Safe Harbor rules can help U.S. tax filers avoid an underpayment penalty on estimated taxes.

Generally, estimated tax payments may be required if you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits and your withholding and credits fall below the applicable Safe Harbor threshold.

You can generally avoid an underpayment penalty if you pay either:

90% of the total tax for the current year, or

100% of the tax shown on last year’s return.

The second option can be the simpler approach because last year’s tax is already a known number.

But it may not always be ideal. If last year’s tax bill was unusually large, especially compared with what you expect to owe this year, it may make sense to look more closely at the numbers.

High Earner? The Rules Are Slightly Different

If your adjusted gross income, or AGI, was over $150,000 in 2025, or over $75,000 if your filing status for 2026 is married filing separately, the prior-year Safe Harbor threshold generally increases from 100% to 110%. The current-year threshold remains 90%.

That means you may generally avoid an underpayment penalty by paying either:

90% of the total tax for 2026, or

110% of the tax shown on your 2025 return.

Now suppose 2026 turns out to be an unusually big income year.

Maybe you sold a business. A large RSU grant vested. You received an outsized bonus.

In that situation, using the prior-year Safe Harbor, when payments are made on schedule, may allow you to retain more cash during the year rather than immediately paying your full projected current-year tax liability.

Every year, we talk with high-income clients about this strategy.

So, Are You on Track?

This is where the fall checkup comes in.

Look at the federal taxes already withheld from income sources such as your salary, bonus, Social Security, or pension income. Then add any quarterly estimated tax payments you have made so far.

Next, look ahead.

How many paychecks do you have left this year? How much federal tax do you expect to be withheld from each one?

Chart those remaining paychecks and estimated withholding. Then add that amount to everything already paid and withheld.

Once you have your grand total, compare it with the Safe Harbor limits.

On track? Breathe easy.

Coming up short? Make a plan.

That could mean making an estimated tax payment by the applicable deadline or increasing the withholding rate on your W-2 income for the rest of the year.

Payment timing matters. Estimated tax requirements generally apply across separate payment periods, so reaching the annual Safe Harbor amount later may not eliminate an underpayment penalty from an earlier period. Federal income tax withholding is generally treated as having been paid evenly throughout the year, while estimated tax payments are generally credited when they are made.

Safe Harbor Does Not Mean the Tax Bill Disappears

Reaching the Safe Harbor can help you avoid an underpayment penalty, but it does not mean the rest of your tax bill goes away.

Estimated tax payments generally must be made by the applicable payment deadlines throughout the year. Any remaining balance for 2026 will generally be due by the federal tax-filing deadline in April 2027, even if you file an extension.

After the payment deadline, interest and, in some cases, penalties may apply to any unpaid balance until the tax is paid.

That is why fall can be a useful time to check the numbers rather than waiting until tax season to find out where you landed.

Every year, we talk with high-income clients about this strategy, particularly when a large bonus, RSU vesting, business sale, or other event has changed the tax picture.

A few calculations now can give you a much better idea of what April may look like.

Not sure where you stand? Talk with your tax professional and financial advisor about your 2026 tax picture before the year gets away from you.