There a some exceptions to avoid a penalty for underpayment of taxes. I know there are others but the exception I have always used is to pay (or have withheld) enough taxes to exceed the prior years tax liability. In other words, if your total tax liability for the tax year 2011 was $10,000, your withholdings and estimated payments should exceed that amount. If you need to make estimated payments to accomplish this, be careful because I believe they need to be spread out for each of the 4 quarters. In the past I have gotten around this problem by having my employer withhold huge amounts at the end of the year. See someone that knows what they are talking about.
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I hope you get to see this before admin deletes it.
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