To follow-up on your issue, we as taxpayers are supposed to pay tax as we go through the year receiving income. So, if you know you will not have enough tax withheld for your income level and tax status, you should make estimated payments or have your W-4 adjusted (as applicable) to avoid owing tax at the end of the year and being subject to an underpayment penalty and associated interest on that penalty.
That being said, with regard to your assumption about avoiding incurring the penalty for a given year, per the IRS for tax year 2024 (Underpayment of Estimated Tax By Individuals Penalty), here's the criteria you'd need to meet (you should review the highlighted page on this issue for more information):
Avoid a penalty
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:
- Your filed tax return shows you owe less than $1,000 or
- You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%.
So to clarify, your initial question asked if you should make estimated payments and technically you should. This being said, you may qualify to avoid under payment penalties on the taxes you owe if you meet the above criteria.
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