IRS requires you to establish your Required Annual Payment for the year and pay as you go.
You can base your estimate on prior year's tax , or 90% of this year's tax, whichever is smaller.
Each period your withholding and estimated tax paid must be at least 25% of the estimate, even if your income is uneven, [Otherwise, you will be penalized.] This is the simplified method, default.
If your periodic withholding and estimates in 2025 are at least 100% / 4 = 25% ( 110% / 4 for certain high income taxpayers) of your 2024 tax, there will be no penalty on your 2025 tax return, regardless of any jump in income.
You are protected from a sudden capital gain or Roth conversion at year end.
If your estimate is based on this year's tax and turns out to be wrong you may be penalized.
You can compensate by overestimating.
If your estimate is based on prior year's tax, you know that when you file by April 15, which is also the first Estimated Tax payment due date. How convenient.
