Underpayment penalties are assessed if you don't withhold or pay enough tax on income received during each quarter. In fact, it's entirely possible to get hit with an underpayment penalty even though you paid your tax bill in full by the April deadline or are getting a refund.
Example: Joe is self-employed and estimated next year's tax bill at $20,000. Rather than making 4 quarterly payments of $5,000 apiece, he chose to pay $500 in each of the first 3 quarters, and the remaining $18,500 in the fourth quarter. When he filed, his actual tax bill came to $17,270 and he got a $2,730 refund. However, he got hit with the underpayment penalty because he underpaid his estimated tax in the first 3 quarters.
Tip: To reduce or possibly even eliminate your underpayment penalty, you can annualize your income, which you may have started this form already and may need to delete it too. To get back there, search for penalty in the search box and use the Jump to penalty link to be taken there.
When you go through the penalty section, you may be able to request a waiver. If you have an underpayment, all or part of the penalty for that underpayment will be waived if the IRS determines that:
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In 2019 or 2020, you retired after reaching age 62 or became disabled, and your underpayment was due to reasonable cause (and not willful neglect); or
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The underpayment was due to a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty. @amcloud
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