If you owe more than $1,000, when you file your tax return, you may be subject to a penalty.
Excerpt from 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."
If you have been assessed an underpayment penalty, then you can see if you may qualify for an exception to the penalty. You may want to look into these exceptions if this is the first year you owed tax and it is not a normal occurrence (i.e. you had one time income this year).
"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."
To see if you can reduce the amount of penalty you are being charged, go to
- Wages & Income
- Other Tax Situations
- Underpayment penalties
@gary boyd
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