underpayment penalty

[Helen123]

Hi 

I checked the tax underpayment penalty. It seems that people with different salary, the threadhold is different. Can I simply think if my owed tax is less than 1000 dollar, I will be 100% safe without penalty? 

Thanks

[JohnB5677]

Yes. with a limited number of conditions you can avoid a penalty if you owe less than $1,000 dollars.

The underpayment penalty may apply if any of these apply:

• The amount of tax you paid during the tax year is less than 90% of the tax that you owed for the current year. 
• The amount you paid during the tax year did not equal 100%, (110% for higher incomes) of your taxes owed the prior year. 
• The IRS also says you can probably avoid the penalty if the amount you owe is less than $1,000, after subtracting withholding and refundable credits.

"Typically, underpayment penalties are 5% of the underpaid amount, and they're capped at 25%. Underpaid taxes also accrue interest at a rate that the IRS sets annually."

To avoid this situation it is recommended that you adjust your W-4 with your employer or pay estimated taxes.

Tax Underpayment Penalty: What It Is, Examples

Underpayment of Estimated Tax by Individuals Penalty

[Helen123]

ah, so conditions are in parallel. If any of these three satisfied, the penalty will be avodied no matter you fill in tax as RA or NRA, right?

[Mike9241]

here are  the rules for the $1K exception

a) the balance due after subtracting taxes withheld from 90% of your 2023 tax is less than $1,000 or
b) your total taxes are less than $1,000

[Helen123]

thanks. Is it suitable for both RA and NRA tax return?

Helen

[DaveF1006]

Yes.