Novel strategy to avoid Underpayment Penalty without making Q1-Q3 estimated payments?

Wait, so you're saying if I have a ton of money withheld from my W-2 paycheck in December, the IRS pretends like I paid it evenly throughout the year? That sounds too good to be true! Wouldn't that be a loophole everyone would use?

That's exactly right - it's not even a loophole, it's just how the tax code works. Withholding from paychecks is treated as if it occurred evenly throughout the year, regardless of when it actually happened. It's actually written in Internal Revenue Code Section 6654(g)(1). Many people don't take advantage of this because they don't have both self-employment and W-2 income, or they don't realize this option exists. You could literally have your employer withhold your entire December paycheck (or several paychecks) if needed to meet your tax obligation, and the IRS treats it as if you paid throughout the year.

Does it really work with irregular income? I'm a wedding photographer so I make like 80% of my money between May and October, and barely anything the rest of the year. Would this strategy still work for me?

I'm skeptical about these online tools. How exactly does this work with the safe harbor rule if you've made nothing in Q1-Q3? Wouldn't you still be short on the quarterly requirements?

For irregular income, it works even better because the tool helps you determine the minimum amount needed to hit the safe harbor threshold. Since you have seasonal income, you'd just need to adjust your withholding during your slower months to cover your tax liability from the busy season. The beauty of the withholding strategy is that it doesn't matter that you made quarterly payments in Q1-Q3. The IRS treats W-2 withholding as if it was paid evenly throughout the year, even if you only do it in Q4. The tool helps calculate exactly how much you need to withhold to meet either the 90% current year or 100% prior year safe harbor threshold.

How does this even work? The IRS phone system is completely broken - I tried calling for 3 days straight last April and never got through. Are they somehow jumping the queue?

This sounds like BS tbh. Nothing can get you through to the IRS faster. They're just going to take your money and you'll still be waiting on hold forever. Has anyone actually verified this works?

They use a system that navigates the IRS phone tree and waits on hold for you, then calls you back when they have an agent on the line. It's not jumping the queue - you're still in the same line as everyone else, but their system is doing the waiting instead of you. They're actually very transparent about the process. The service monitors the IRS phone systems, dials at optimal times, and then connects you when they reach a human. It saved me hours of frustration, and the IRS agent I spoke with gave me specific guidance about my self-employment tax situation that I couldn't find online.

Can you really just decide which year to count income in? I thought you had to report income in the year you receive it, not when you decide to invoice for it?

It depends on your accounting method. If you're on a cash basis (which most small businesses and freelancers are), you report income when you receive it, not when you earn it. So if you complete work in December but don't send the invoice until January, you'll receive and report that income in the following tax year. This is totally legitimate as long as you're not artificially manipulating when you actually receive payments. You can't deposit a check and not record it - that would be illegal. But you can time when you bill clients and when you make business purchases within reason.

I've used it for clients with seasonal businesses. It's more paperwork (Form 2210 Schedule AI), but it can be worth it if your income is heavily concentrated in certain periods. Basically, you calculate your required payment for each quarter based on what you actually earned that quarter, not 1/4 of your annual income.