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What is the estimated quarterly tax penalty?

I became self-employed last year and did not pay the estimated quarterly taxes. What is the penalty? Is it a percentage of the taxes I owe or of my income?
1 Reply
Expert Alumni

What is the estimated quarterly tax penalty?

It depends.

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. 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.

Penalty figured separately for each period.
Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. This is true even if you are due a refund when you file your income tax return.

Minimum required each period.
You will owe a penalty for any 2016 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of:

  • 22.5% of your 2016 tax, or
  • 25% of your 2015 tax. (Your 2015 tax return must cover a 12-month period.)
For more information see:

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