Is there a way to avoid the interest?
By federal law the IRS can not waive interest, even if they want to.
How can I do this from TurboTax?
In TurboTax 2019 select "Other Tax Situations" and under that elect to start/update "Underpayment Penalties" and work it through.
your "self-imposed 20% rule", that is something I will keep in mind.
That 20% rule is what works for me. It could be higher for you. Let me explain.
When working the SCH C I get a fair number of business deductions from my business income. Office expenses, home office depreciation, vehicle mileage, supplies, parts, etc. These deductions give me my "taxable" business income which for me will be quite a bit less than my gross business income.
Based on my tax bracket, on that taxable business income I will pay up to 22% in "regular" taxes on that.
In addition to the regular tax, I will also pay an additional 15.3% self-employment tax on something like 97.8% of that taxable income. Be aware that the SE tax is basically paying 12.4% of the SE tax to "MY" social security account. 6.2% is the "employee" contribution and the other 6.2% is the "employer" contribution. I look at it as paying my "future self" for social security which I will get when I reach retirement age.
The remaining 2.9% of the SE tax is the Medicare tax that goes into the Medicare general fund.
That means I could "potentially" be paying 37.3% in taxes on that taxable income. However, I'm sending in 20% of my "gross" earnings before deductible business expenses. When I actually do my taxes, what I sent the IRS each quarter will be damn close (if not over) to 37% of my "actual" taxable business income.
So if in your first year of business you feel that 20% isn't enough, then send more. Maybe 25%? For someone that will gross more than $160K (80K if filing single) I recommend 25%. When starting a new business it can take a few years to find that "happy spot".
Finally, if your state also taxes personal income then you must also send quarterly payments to your state. The highest state tax rate I am aware of at this time is California at 13.3% on personal income. So in that first year of business you should send your state a percentage of your gross income that is equal to the highest tax rate of your state. Then in later years you can lower it as appropriate.
