Are you in danger of owing a penalty for underpaying taxes in 2025? There’s still time to right the ship.

Strategy: Increase your withholding between now and year-end. If you then meet one of the safe-harbor rules, the IRS can’t hit you with a penalty. But figuring out how much to withhold isn’t always easy.

Here’s the whole story: Generally, you’re required to pay income tax during the year through payroll withholding. Similarly, you may pay tax in quarterly installments on investment income or if you’re self-employed. The quarterly due dates are April 15, June 15, September 15 and January 15 of the following year (or the following business day if the due date falls on a weekend or holiday). Thus, the final quarterly installment due date for 2025 is January 15, 2026. However, the IRS won’t impose a penalty if you qualify under one of these three safe-harbor rules based on any combination of withholding of installment payments: 1. You pay at least 90% of the current year’s tax liability. This requires you to make a calculated guess of your current tax situation. 2. You pay at least 100% of the prior year’s tax liability. The figure increases to 110% if your adjusted gross income (AGI) for the prior year exceeded $150,000. This is often the easiest method to use because you know the exact amount of your previous year’s tax liability. 3. You pay at least 90% of the current year’s “annualized income.” This method may work for certain taxpayers who receive most of their income on a seasonal basis. For instance, it could work well if you’re an independent contractor dependent on holiday sales. Due to a numerous tax law changes in recent years—including suspension of personal exemptions and reductions in itemized deductions— you may be underwithheld for 2025, especially if you (or your spouse) added or switched jobs this year. Best approach: Analyze your 2025 liability right now. You can use the latest version of the IRS calculator at www.irs.gov/individuals/ tax-withholding-estimator for a quick determination. If you need to increase your withholding, notify your payroll department immediately. Tip: Remember that a January 2026 installment can still bail you out.