Do you ever find yourself overpaying with this method? I'm worried about giving the IRS an interest-free loan if I calculate too conservatively.

I do sometimes end up overpaying slightly, but I personally prefer that to underpaying and facing penalties. In years when I've overpaid, I just apply the refund to next year's estimated payments. If you're concerned about overpaying, you might want to be more precise in your calculations. I typically use a rough estimate of my marginal rate plus state taxes (about 35% in my case), but you could use tax software to run a more accurate projection after each significant trade to get closer to the exact amount.

The quarterly tax system is technically "pay as you go," so each payment should reflect your income for that quarter. If you have minimal gains in early quarters and then a big gain later, you would make a larger payment for the quarter when you had the gain. You don't need to retroactively adjust earlier quarters.

The married filing separately thing is interesting! I've rarely seen cases where it's beneficial. But what about separated couples who aren't legally divorced yet? Would you have some exception for them?

Good point about separated couples! I'd create a simple "legally separated" status that would essentially treat them as single filers. The current system with MFS is just too punitive with all its limitations and phase-outs. The problem is that MFS was designed to prevent gaming the system, but it's become so restrictive that it actually creates unfair outcomes for people in difficult situations, like those separating or dealing with a spouse who won't cooperate on taxes. A better-designed single status for separated individuals would be much more straightforward.

Average cost basis would be amazing! Also why are crypto transactions so complicated tax-wise? I bought and sold some Bitcoin last year and the tax calculations were insane. Each transaction created a taxable event and I had hundreds.

I tried setting up an IRS online account but got stuck at the ID verification part. It kept rejecting my driver's license photo. Any tips on getting past that?

I had the same issue with the ID verification initially. Make sure you're taking the photo in good lighting with no glare on your ID. Also, they're really strict about the photo quality - I had to use a different device with a better camera. If that still doesn't work, they offer an alternative verification process through ID.me that some people find easier. You can also request a mail verification code if the digital methods aren't working. It takes longer but it's more reliable if you're having technical issues with the photo verification.

This is a really important point. How do you know if you need to make estimated payments for next year? Is there some threshold?

Does First Time Penalty Abatement work if you have multiple years unfiled? I thought it was only for a single mistake, not years of non-compliance.

First Time Penalty Abatement only applies to one tax year, but even with multiple years unfiled, they can still qualify if they didn't have any penalties in the three years before the earliest unfiled year. So if 2021 is their earliest unfiled year, they'd need a clean compliance history for 2018-2020. You're right that it's designed for isolated mistakes rather than patterns of non-compliance, but the IRS often still grants it for the first year in a multi-year situation. The remaining years wouldn't qualify for first-time abatement, but might qualify under other reasonable cause arguments depending on the circumstances.

That 30% recommendation is really smart. I used to only save 15% and kept getting surprised by how much I actually owed. Switching to 30% has made a huge difference. I even set up automatic transfers to my "tax" account whenever money hits my checking account.

Thank you for mentioning this! With the baby coming next month, I completely forgot to factor in how that would affect our taxes next year. Would you recommend we split the $2,000 child tax credit between both our W-4 forms or put the full amount on just one of our forms? Also, do you know if we qualify for the child care tax credit as well as the dependent care FSA? Or can we only use one of those options?

You can put the full $2,000 on just one W-4 form, or split it between both - the end result will be the same. Just make sure you don't claim it on both forms (which would incorrectly double-count the credit). Regarding the child care tax credit vs. dependent care FSA: You can potentially use both, but there's an important limitation. The expenses you pay through the FSA cannot also be used for the child care credit - no "double dipping." Usually, with your income level, the FSA is more beneficial because it reduces your taxable income directly. The child care credit percentage is reduced at higher income levels, making the FSA more valuable for most dual-income professional couples.

This is spot on. My wife and I have almost identical incomes to the OP, and increasing our 401k contributions made a huge difference. We each increased from 10% to 15% contributions and it dropped our tax bill by almost $3,000. Plus that money is growing tax-deferred instead of going to the IRS. Also worth noting that at their income level, they might be close to the phase-out range for some tax benefits once the baby arrives, so tax planning becomes even more important.