there is a safe harbor that will allow you to avoid federal underpayment penalties. Your withholding must equal 100% of your 2019 tax or 110% of 2019 tax if your 2019 adjusted gross income was $150,000 or more. using this you could owe millions without federal penalty. your other option is to make estimated tax payments. however, the usual method for penalties computation is to assume your tax liability is even throughout the year as is withholding. thus under this method you could have penalties for the first couple of quarters. there is a way to avoid this by using the annualized income method. this requires you to compute your actual taxable income for the first 3 months, 5 months, 8 months and the full year. the amount is annualized the tax is computed on this annualized income and then de-annualized. this is then compared to actual estimates and tax withheld for the period.
