Mike9241, thank you so much for your prompt reply. Your explanation is clear and easy to follow. I just submitted $3000 estimated tax payment today on the IRS Direct Pay website. If I understood correctly, I will be responsible for tax penalty for the first 3 quarterly payment of $500, which I assume is roughly the interest of $500 from 4/15/2023 to today + interest of $500 from 6/15/2023 to today + interest of $500 from 9/15/2023 to today. My extra $1000 payment today should cover more than these interests so I will not incur further penalty even though I don't know what interest rate IRS uses. I just want to make sure the penalty will not be calculated based on my 2023 tax liability, which will be significantly higher than 2022. I will not use the annualized income method since I will have to pay 90% of 2023 liability by 1/16/2024. I would rather pay the small penalty and allow the 90% of 2023 liability to earn interest from 1/16 to 4/15/2024, which will be more than the penalty. Please let me know if my understanding is correct. Thanks again and happy new year!
