When should taxpayers begin to plan for their estimated tax payments?

Planning for estimated tax payments should ideally begin at the start of the taxable year. This approach allows individuals to comprehensively assess their expected income, potential deductions, and credits throughout the year, enabling them to estimate their tax liability more accurately.

By initiating this planning process at the beginning of the year, taxpayers can make adjustments to their withholding or estimated payments as necessary, ensuring they meet their tax obligations without incurring underpayment penalties. This proactive strategy can help in budgeting for taxes as part of overall financial planning, allowing taxpayers to align their spending and saving practices accordingly.

In contrast, waiting until just the month before payments are due can lead to rushed decisions and potential miscalculations, which might result in penalties for underpayment. Relying solely on the previous year’s tax return to determine estimated payments might not accurately reflect the current year’s income, especially if there have been significant changes in a taxpayer's financial situation. Starting to plan only when beginning a new job overlooks the need for consistent and ongoing analysis of income sources and tax liabilities over the entire year. Thus, initiating the planning process at the start of the taxable year is the most effective strategy for managing estimated tax payments.