It is funny-wierd. I panicked last December and wrote a YUGE check to the IRS and another to California, based on my straight line extrapolation estimation of 2016 taxes based on my 2015 taxes. Over christmas vacation, i panicked again because i realized that i had neglected to factor in the progressive bump that occurs at a certain level. so i made a more careful estimate based on the 2016 tax tables. However, as it turned out, turbotax told me that my original december YUGE checks were more or less sufficient (putting me within 1k or 2k of the actual taxes owed, one way or another). I’m not sure why that happened, but I think when all the dust settled, my income estimate of mid January of this year was about $25k on the high side. Maybe subtracting that amount brought me on the low side of one of the progressive tax rate singularities. With all the large amounts floating around, and not being a CPA myself, I was reasonably happy with being on the safe side in my over-estimates. Due to lack of spending spree I was able to afford writing the extra checks in January and I am now anticipating getting that money back. If I made a minor mistake somewhere, the IRS will hopefully catch it and recalculate my correct tax rate, dipping into the extra reserve tax that I have already paid (on the order of $6k which I imagine should ordinarily be enough to handle some relatively minor accounting error).
The best advice you have gotten is to get a good accountant.
True, I was telling you what I encountered so each situation is different. Apparently what I encountered is also odd or doesn’t fit what you described.
You should NOT be in a position to panic, especially if you are holding back your funds just in case. That is why you get an accountant so he/she tells you what to do in advance and also the best way to deal with changes in circumstance.
With $125K that would be a tiny expenditure and investment in your peace of mind.
The most peculiar thing for me was that even though we filed using tax software that does the calculations (a package for accountants), the IRS refunded me about $500.