Go back through the penalty section. Search for penalty and use the Jump to penalty link to go through the questions. This will take you to the underpayment penalty section and we'll take you through the steps to possibly reduce your underpayment penalty.
In general, you may owe the penalty for 2021 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:
90% of your 2021 tax, or
100% of your 2020 tax. Your 2020 tax return must cover a 12-month period.
Underpayment penalties are assessed if you don't withhold or pay enough tax on income received during each quarter. In fact, it's entirely possible to get hit with an underpayment penalty even though you paid your tax bill in full by the April deadline or are getting a refund.
Exceptions to the Penalty
You won't have to pay the penalty or file this form if either of the following applies.
You had no tax liability for 2020, you were a U.S. citizen or resident alien for the entire year (or an estate of a domestic decedent or a domestic trust), and your 2020 tax return was (or would have been had you been required to file) for a full 12 months.
The total tax shown on your 2021 return minus the amount of tax you paid through withholding is less than $1,000.
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