Some individuals with substantial income in addition to salaries may find that the amount of tax withheld from their salaries isn’t enough to cover their required estimated tax payments. This may be the result of, for example, miscalculations or unusual sources of income—for example, a windfall on the sale of a capital asset earlier in the year, or unexpected exposure to the 3.8% surtax

An individual subject to the estimated tax must pay, on each of four installment dates (April 15, June 15, and September 15 of the current year, and January 15 of the following year, for a calendar-year taxpayer), 25% of his “required annual payment” for the current year. The required annual payment generally is the lesser of 100% of the tax shown on the taxpayer’s return for the preceding year or 90% of his tax for the current year. However, in figuring 2015 estimated taxes, taxpayers whose 2014 AGI was over $150,000 have to pay the lesser of 110% of the tax shown on the 2014 return or 90% of their 2015 tax liability.

The applicable test is applied separately to each installment. Thus, a taxpayer may be penalized for the underpayment of estimated taxes for any installment for which his estimated tax payments plus taxes withheld from his salary (and certain other payments such as pensions and annuities) don’t total at least 25% of his required annual payment.

An individual who has underpaid an estimated tax installment can’t avoid the penalty by increasing his estimated tax payment for a later period (although payment in a later period will reduce the period for which the penalty applies).

Income tax withheld by an employer from an employee’s wages or salary is treated as paid in equal amounts on each of the four installment due dates unless the individual establishes the dates on which the amounts were actually withheld. Thus, if an employee asks his employer to withhold sufficient additional amounts for the rest of the year, the penalty can be retroactively eliminated. This is because the heavy year-end withholding will be treated as paid equally over the four installment due dates.