I'm not sure what I did in 2024 that would generate the 502 UP underpayment in 2023. In 2024, my job took a turn, I worked 9 mons due to 3 of unemployment months. Of the nine month, Six of the nine months was earning minimum wage which is less than what I used to make in my real job, the other three was unemployed. The entire income dropped significantly to minimum wage. Yet I am told that I owe $1078+ interest to which I went ahead and pay since it is deadline to file 2024 and I did not want to be fine. After the filing, It generated another set of 502-UP form for next year 2025 with a quarterly of $338. The job I am doing now pays much less then what I used to earn in 2023 and prior and part of 2024 (3 month). My deduction has always been 0. So why am I owed tax and underpay? I am very confused. Can someone please help me explain what cause this? My deduction has always been the same year after year - single '0'. how is it that I am underpaying my tax when I pay each timeI do my tax, I would either get a refund from years past or pay when I owe a small change. This time it is significant and underpay. Please help.
First, double check your entries to be sure that you entered the correct amounts for the state income and withholdings. Double check the commas and decimal points as well. If all entries are correct, then you would need to figure out if your employer did withhold taxes.
When you were working at the minimum wage job were they taking taxes out for you? If not, then you would have had the underpayment.
Hello Vanessa, thank you for the reply. I checked my stubs and it shows MD tax was taken out. Everywhere I have worked in the past, I always indicate "0" as my declared exemption so I don't know why I am considered 502UP. After my 2024 filing, it printed the another set of 502UP with expected quarter of about 3x as much tax to be expected. 2023 and 2024 is the first time I have ever seen such.
It sounds like you may need to update your state withholding form with your employer to ensure you have enough state income taxes withheld from your paycheck. Maryland does have a withholding calculator that you can use to assist.
You can then take the amount from that form and enter it on Form MW507 to submit to your employer. Your entries on this form will then be used to calculate the amount of state income taxes that need to be withheld per pay period to ensure you pay enough in state income taxes to minimize any potential underpayment penalties in the future.