Section 6654 imposes an interest charge on underpayments by individuals of estimated income taxes, which generally are paid by self-employed individuals.

This interest charge generally does not apply if the individual made estimated tax payments equal to the lesser of (a) 90 percent of the tax actually due for the year or (b) 100 percent of the tax due for the immediately prior year. The availability and computation of the prior year safe harbor has been adjusted by Congress repeatedly during the past decade. Currently, for individuals with adjusted gross income exceeding $150,000, the prior year safe harbor percentage increases and decreases from year to year. The purpose of these changes is to shift revenues from year to year within the five- and ten-year budget windows used for estimating the revenue effects of tax legislation.