topic Re: Penalty on Underpayment in Get your taxes done using TurboTax

Penalty on Underpayment

fasteddie577 — Sun, 26 Feb 2023 23:36:49 GMT

I did my son's income tax today. In the past he's alway gotten a refund, but this year he owe's $108 due to the income tax on the interest earned on his savings account in 2022. Will he be subject to a penalty for the underpayment of tax? Thank you

Re: Penalty on Underpayment

DavidD66 — Sun, 26 Feb 2023 23:51:40 GMT

No, he will not be assessed a penalty for underpayment of estimated tax, as long as he pays the tax on or before the filing deadline - April 18.

Re: Penalty on Underpayment

Brandt8211 — Mon, 27 Feb 2023 00:08:58 GMT

Not to worry. Pretty sure there's no penalty unless your tax liability is over $1000.

Re: Penalty on Underpayment

fasteddie577 — Mon, 27 Feb 2023 00:47:58 GMT

Thank you.

Re: Penalty on Underpayment

LindaS5247 — Mon, 27 Feb 2023 01:02:12 GMT

No, he won't.

This penalty generally only applies when you owe more than $1,000 in federal tax on your tax return. Basically, you get charged this penalty for owing too much tax and not making the proper payments during the year (either through withholding on your paycheck or estimated tax payments)

Per the IRS:

"The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments.

If you don't pay your tax or you pay an insufficient amount of tax through withholding, you might also have to pay estimated taxes. If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax."

Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller."

Click here for additional information regarding the penalty for the Underpayment of Estimated Tax.