What happens if a taxpayer pays estimated taxes based on the wrong income projection?

When a taxpayer pays estimated taxes based on an incorrect income projection, there are several potential outcomes, but one key implication of underestimating income is that they will likely owe additional taxes at year-end. This happens because estimated payments are designed to cover the tax liability based on the income that is expected to be earned throughout the year. If the projection is lower than the actual income earned, the taxpayer will not have remitted enough in estimated taxes. Consequently, this leads to a tax liability that exceeds what has already been paid, resulting in the tax owed becoming due when their return is filed.

In addition to owing more taxes, taxpayers could face several other scenarios based on the accuracy of their estimated payments and actual income. However, underestimating income will most certainly lead to a balance due at year-end. Thus, this outcome is a direct and logical consequence of making incorrect estimations in terms of projected income.