You can
avoid an underpayment penalty if you make timely payments* and:
- owe less than $1,000 in tax after subtracting payments
- paid at least 90% of the tax for the current year
- paid at least 100% (110% if AGI is over $150k) of the tax shown on the return for the prior year
* Any payments made by withholding are considered to be timely regardless of when in the year the withholding actually happens. This isn't the case for estimated payments. If you make 4 equal estimated payments by the due dates (around 4/15, 6/15, 9/15, 1/15, adjusted for weekends and holidays) and hit one of the safe harbors listed above then you won't owe a penalty.
However, if your estimated payments aren't made in equal installments then you might owe a penalty even if you otherwise paid enough in total. In this case you have to fill out a more complicated part of
Form 2210 that considers when the payment was made compared to when your income was earned. This is probably what you'll have to do this year, but since the extra income was earned in Q4, as long as you pay enough by Jan 18th you won't owe a penalty. I would suggest you fill out Form 2210 to make sure you pay enough.
Since it's the most predictable (doesn't rely on estimating this years taxes), I like to pay 100%/110% of last year's taxes. My preference is to pay through withholding since I can pay it whenever and can tweak it during the year if needed, but paying estimated taxes in 4 equal installments isn't too bad either. Alternatively, if after this year's experience you decide the more complicated part of Form 2210 isn't too bad and your extra income continues to mostly happen in Q4 then making only Q4 estimated payments is likely the most optimal option as it means you hold onto the money the longest -- you'll just have to decide if any extra interest you can earn is worth a little extra hassle.
