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Level 2
posted Mar 2, 2023 4:41:11 PM

Underpayment penalty

I had a $20K underpayment for my tax return last year for 2021 which I paid about $300 in penalty at the time of filing. This year it appears that I have a $13K underpayment in 2022 because my income increased by 40%. Since I paid all of taxes and the penalty in 2021, will I still incur a penalty this year for this underpayment?

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1 Replies
Level 15
Mar 2, 2023 5:05:50 PM

Every year is separate.

 

If you owe more than $1000 when filing your 2022 tax return, you may be assessed a penalty for not paying enough estimated taxes during the year.  The safe harbor to avoid the penalty is if your tax payments for 2022 were equal to or greater than 110% of your 2021 tax liability.