I always get a kick out of people who are excited to get a big tax refund. “Tax refund sales” pander to the financial ignorance of our nation. These fools rejoice in the fact that they got to loan the government their own money interest-free for a period of up to 16 months!
An employee does this by selecting an appropriate number of allowances on his Form W-4. An independent contractor or a partner does this by paying an appropriate amount with his quarterly estimated tax payments.
Since no one is withholding your taxes anymore, you are responsible to pay them yourself. This includes your federal income taxes, your payroll taxes (Social Security and Medicare), your state income taxes, and if incorporated, your state and federal unemployment insurance payments.
The first, least serious mistake, is to pay your taxes earlier than you have to (or pay more than you owe in the first place. The second, more serious mistake, is to not pre-pay a high enough percentage of your taxes and thus owe penalties and interest.
1. You didn’t owe any tax at all last year. (Good luck with this one.) 2. You underpaid by less than $1000. (So basically you never want to pay that last $1000 you owe early.) 3. You underpaid by less than 10% of what you owe this year.
Doctors rarely qualify under rule 1, and rules 2 and 3 require you to somewhat accurately estimate your current tax bill. So rule 4 is really the only safe harbor that most physicians can actually count on.