Avoiding underpayment penalties requires having paid the least of $1000 less than your total liability, 90% of this yearu2019s total, and 100% (110% for income over $75K married filing separately or $150K otherwise) of last yearu2019s income tax.The IRS also wants to collect in the quarter you earned the taxed income.Refer to IRS Topic No. 306 Penalty for Underpayment of Estimated Tax and IRS Publication 505 (2022), Tax Withholding and Estimated Tax for the safe harbor rules.With my consulting business, I formed a LLC which opted to be taxed as an S-Corp. It employed me personally on a W2, my bank handled withholding, and my LLC filed Form 941 Employeru2019s Quarterly Federal Tax Return quarterly plus Form 1120S U.S. Income Tax Return for an S Corporation annually.This provides liability protection, gives you benefit options, and lets you split your pay into salary and profit distributions which arenu2019t subject to FICA and Medical taxes.Regardless of my employment status, Iu2019ve always aimed for $500 state and federal refunds. With my back-of-the-envelope calculations at least that accurate, if I get busy that lets me file late without penalty. At the same time, itu2019s not so much I feel bad about making interest free loans to governments.Consult a CPA before doing anything.