The IRS expects you to pay federal taxes on income as you earn it, not in a big lump sum when you file your tax return. This includes tax on income from a job, a business and investments. In most cases, to avoid a penalty for underpayment of taxes, you must have paid throughout the year at least 90 percent of the tax due for that year or 100 percent of the tax due from the previous year, whichever is smaller. The penalty is essentially interest on the amount underpaid. You can calculate it yourself, using IRS Form 2210, or let the IRS calculate the penalty for you.

There are two ways to pay tax throughout the year, through payroll tax withholding and by making estimated tax payments - generally one each quarter. If you’re making estimated tax payments, they should be in four roughly equal amounts or you could be assessed a penalty. If you were making unequal payments because your income was received unevenly throughout the year - for example, you got a big year-end bonus -- you could avoid a penalty by annualizing your income on Form 2210.

If you get near the end of the year and realize you have a lot of income -- from investments perhaps -- that you haven’t paid taxes on, you might be able to avoid an underpayment penalty by increasing your withholding at work. Withholding is assumed to have been paid throughout the year, even if it comes late in the year.

For details, see IRS publication 505, Tax Withholding and Estimated Tax, at http://www.irs.gov/publications/p505/index.html.