Underpayment Penalty

Category: tax

A penalty charged by the IRS when a taxpayer fails to pay enough tax through withholding or quarterly estimated payments.

The IRS requires that you pay as you go. If you wait until April to pay 100% of your tax bill, you’ll owe the tax *plus* an underpayment penalty. It is calculated like interest, so the later you are, the more it costs.

Common Examples

• The taxpayer faced a significant underpayment penalty after failing to submit their quarterly estimated tax payments for the freelance income.
• Our automated calendar alerts ensure we never trigger an underpayment penalty by filing the required quarterly estimated tax payments on time.