The underpayment penalty is not limited to quarterly estimated taxes paid. The IRS expects you to pay your federal income tax obligation as you earn income throughout the year, either through paycheck withholdings or estimated tax payments. Pay too little, and you could end up with a big tax bill when you file your federal income tax return — plus an underpayment penalty.
An underpayment penalty is a penalty charged to a taxpayer who does not pay enough toward his total tax obligation throughout the year. Taxpayers subject to the underpayment penalty use Form 1040 or 1040A to determine the amount.
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