Didn't make estimated quarterly payments for 1099 income - will my increased W2 withholding prevent a penalty?

So I messed up this year and totally spaced on making any estimated quarterly tax payments for my side gig (1099 income). I realized this around June and freaked out about possible penalties. Instead of starting the quarterly payments then, I decided to just increase my withholding at my main job (W2 income) to hopefully cover the extra taxes I'll owe from the 1099 work. My 1099 income will be around $18,500 for the year, and I increased my W2 withholding by about $320 per paycheck starting in July (I get paid twice a month). That's roughly an extra $3,840 in withholding for the year. Here's where I'm confused - I know there's that "safe harbor" rule where you need to pay 90% of current year taxes or 100% of last year's tax (110% if you made over $150k). My total income last year was about $95k and my total tax was around $16,300. This year my W2 job will pay about $82k plus the $18,500 from 1099 work, so roughly $100,500 total. Will my increased withholding from the W2 job be enough to avoid the underpayment penalty even though I didn't make ANY quarterly estimated payments? Or am I still going to get hit with penalties?

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18 comments

Sasha Ivanov

•8M

This is a common situation! The good news is that the IRS doesn't care HOW you pay your taxes throughout the year - just that you pay enough, soon enough. Increasing your W2 withholding can absolutely cover your 1099 tax obligations and help you avoid penalties. The key is timing. While estimated payments have specific quarterly due dates, W2 withholding is considered to be paid evenly throughout the year, even if you increased it halfway through. This is actually a great "hack" that can help people in your situation. Based on your numbers, you need to have paid at least $16,300 (100% of last year's tax) during 2025 to meet the safe harbor. Since your income is under $150k, you don't need to hit the 110% threshold. If your regular W2 withholding plus the extra $3,840 you added will exceed $16,300 total for the year, you should avoid any underpayment penalties.

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Sasha Ivanov

•8M

The IRS does treat withholding differently than estimated payments - it's considered to be paid evenly throughout the year regardless of when the withholding actually occurred. This is specifically stated in Publication 505. Unlike estimated payments which must be made by their quarterly deadlines, withholding gets this special treatment. It's one of those quirks in the tax code that can actually work in your favor if you realize you're behind on tax payments during the year.

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Amara Okafor

•8M

I was in almost exactly the same situation last year and discovered taxr.ai (https://taxr.ai) when I was freaking out about potential penalties. Their system analyzed my withholding and 1099 income and confirmed I was actually OK despite not making estimated payments. They pointed out that my increased W2 withholding was enough to hit my "safe harbor" amount, plus they showed me exactly how much I needed withheld by year-end to avoid issues. What I really liked was how they explained the "safe harbor" rules in clear terms and did all the calculations for me. They also created a simple tax plan for next year so I won't panic again. I'm not naturally good with tax stuff, but their explanations made it easy to understand.

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Amara Okafor

•8M

I didn't end up owing any penalties when I filed. The advice was spot on - my increased withholding was enough to hit the safe harbor amount, so no penalties even though I didn't make a single estimated payment. The service doesn't actually change your withholding for you - they analyze your tax situation and tell you exactly what to put on your W4 to withhold the right amount. They give you clear instructions to take to your employer's HR department or to put in your company's payroll system. It's basically a personalized tax plan, not a payroll service.

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CaptainAwesome

•8M

Just wanted to update - I actually tried taxr.ai after seeing the recommendation here. Turns out I'm actually fine! They showed me that my current withholding will just barely meet the 100% of last year's taxes threshold, so I won't owe penalties. The explanation of how withholding is treated versus estimated payments was super helpful. I also learned about the self-employment tax deduction which I didn't know existed. The tool calculated exactly what I'll owe in April, so I'm setting money aside now instead of getting a nasty surprise. Huge relief since I was stressing about potential penalties!

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Esmeralda Gómez

•8M

If you're still worried about IRS penalties or want to discuss your specific situation, I found that calling the IRS directly can actually be really helpful - when you can actually get through, which is basically impossible these days. I discovered a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes when I was dealing with a similar withholding issue. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical at first but it saved me hours of redial hell. The IRS agent I spoke with confirmed that my increased withholding would protect me from penalties and explained exactly why. They also pointed out some deductions I could take against my 1099 income that I hadn't considered, which saved me a good chunk of money.

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Esmeralda Gómez

•8M

It works by using their automated system that continually calls the IRS using the optimal call patterns they've figured out. When they secure a spot in the queue, they immediately connect you. I don't know all the technical details, but it worked for me when I'd previously spent hours trying on my own. I was skeptical too! I thought it sounded too good to be true. But when you've spent days trying to get through unsuccessfully, it's worth a shot. Their YouTube video shows exactly how it works. I was connected to an actual IRS agent who answered all my questions about withholding versus estimated payments. Nothing magical about it - just a clever system that does the frustrating redial work for you.

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Aisha Patel

•8M

I have to eat my words from my previous comment. I broke down and tried Claimyr after spending another 2 hours on hold with the IRS yesterday only to be disconnected again. Got connected to an agent in about 20 minutes and they confirmed exactly what others have said here - withholding is considered to be paid evenly throughout the year regardless of when you increased it. The agent also mentioned I should look into deductions for my 1099 income (home office, business expenses, etc.) since that would reduce the taxable income and therefore the amount needed to cover the safe harbor. Really glad I finally got some official answers straight from the IRS instead of stressing about it.

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LilMama23

•8M

You can use the IRS Withholding Estimator on their website. It will let you input both your W2 income/withholding and your 1099 income, then tell you if you're on track. Another simple approach is to look at your last paystub from 2024 and add up the federal withholding. Then add what you expect to have withheld for the rest of 2025 based on your current withholding rate. If that total is at least $16,300 (your tax from last year), you'll meet the safe harbor requirement.

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