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New Member
posted Feb 8, 2025 4:23:33 PM

I am not required to pay estimated taxes but as I do my review it says I have an underpayment penalty - how do I get rid of that

0 5 1812
5 Replies
Level 2
Feb 8, 2025 4:41:58 PM

You need to pay at least 90% of the tax on your current-year return or 100% of the tax shown on the prior year's return, to avoid the underpayment penalty for estimated taxes. 

New Member
Feb 8, 2025 4:52:16 PM

I was not required to pay estimated taxes in 2024.  My employer withholds tax from each paycheck

Level 15
Feb 8, 2025 5:02:40 PM

Yeah, but if they don't withhold enough, there can be a penalty if not large enough to cover all...or owe more than another $1,000 at tax time....(with messy details as to how much is enough)

 

If it's a few $$ penalty, just move on and grumble.

___________

.....or if you are annoyed, and want to see if you can eliminate it or minimize it:

 

Then,,,go thru the Underpayment Penalty interview on the "Other tax Situations" page and see what happens to it.

Level 2
Feb 8, 2025 5:06:35 PM

To avoid paying an underpayment penalty, you are required to either pay at least the amount of taxes paid on the prior year's return or 90% of the tax on your current year return. If your employer is not withholding enough taxes from your paycheck, you can complete a W-4 and submit it to your employer to have additional taxes withheld for 2025 or you may have the same issue next year when filing taxes. The other option is make quarterly estimated tax payments. 

Level 2
Feb 8, 2025 5:09:16 PM

My comments are not legal or professional tax advice, just been through it before. 🙂