What minimum percentage of the taxes owed in the current year must be paid to avoid a penalty?

To avoid a penalty for underpayment of taxes, taxpayers generally need to pay at least 90% of the total tax owed for the current year. This requirement helps ensure that taxpayers are making sufficient progress in settling their tax obligations throughout the year. If a taxpayer underpays below this threshold, they may be subject to penalties which are designed to encourage compliance with tax law and proper estimates of tax liability.

It's important to understand that the 90% rule applies to the current year’s liability, and taxpayers also have the option to use the previous year's tax liability as a benchmark. If they paid 100% of their tax owed in the previous year and that amount was applicable under certain income thresholds, they might not incur a penalty in the current year. However, using the current year's amount, the 90% figure is the key minimum benchmark to avoid penalties, making it a crucial aspect for anyone planning their tax payments.