Underpayment Penalty

Forum|Forum|4 years ago
December 30, 2021
1 reply
41 views

I may have underpaid my federal and Michigan state taxes for 2021. I didn’t realize I needed to make quarterly estimated payments if I knew I would owe at the end of the year. The last quarterly estimated payment is due January 15, 2022. Is there anything I can do by then to avoid paying a penalty on my underpayment?

I read the penalty is waived if I paid 100% of last years taxes. Does that mean if I paid my tax liability of last year in this years taxes. If so I paid 300 less this year (2021) in federal tax than last year (2020).

Mike9241

Level 15

estimated taxes are due on a quarterly basis. so paying 100% of your estimated taxes now will not avoid the penalties for the 1st 3 quarters. but read the following

There will be no federal penalties for not paying in enough taxes during the year if withholding
1) And timely estimated tax payments equal or exceed 90% of your 2021 tax
or
2) And timely estimated tax payments equal or exceed 100% of your 2020 tax (110% if your 2020 adjusted gross income was more than $150K)
or
3) the balance due after subtracting taxes withheld from 90% of your 2021 tax is less than $1,000
or
4) your total taxes are less than $1,000

state laws differ

Mike9241

Skives19Author

Level 2

Number 2 is where I am confused. In 2020 we paid $6,668 in federal tax ($6,646 was due so s $22 refund). In 2021 we paid $6,498.20 in federal tax. I’m confused on whether I can make an estimated payment by January 15, 2022 of $300 I could avoid any or all penalties?

AmyC

Level 15

I am assuming you believe this year you will owe more than $1,000 to federal. The associated penalty can be waived if you paid it at least as much as your tax bill last year, $6,466. Unless you are higher income, then you need to have paid in $7,311.

You may be able to avoid all penalties. See About Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts. You still have time to pay state and federal. Most states and the IRS accept payments online.

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