JohnB5677
Expert Alumni

Get your taxes done using TurboTax

There are IRS guidelines on when you will be charged a penalty or interest.

 

You must make timely payments.  A large payment towards the end of the year is not timely.  The IRRS expects a payment each quarter.

Please see if  Estimated taxes are right for you.

In addition, you can avoid the penalties with these guidelines.

 

  • The amount of tax you paid during the tax year is less than 90% of the tax that you owed for the current year.
  • The amount you paid during the tax year did not equal 100%, (110% for higher incomes) of your taxes owed the prior year.
  • The IRS also says you can probably avoid the penalty if the amount you owe is less than $1,000, after subtracting withholding and refundable credits.

"Typically, underpayment penalties are 5% of the underpaid amount, and they're capped at 25%. Underpaid taxes also accrue interest at a rate that the IRS sets annually."

 

To avoid this situation it is recommended that you adjust your W-4 with your employer or pay estimated taxes.

Underpayment of Estimated Tax by Individuals Penalty

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post