Yes, you can have an underpayment penalty if you don't have enough taxes withheld to cover the taxes that you owe.The underpayment penalty may apply if : 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% 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.To avoid this situation it is recommended that you adjust your W-4 with your employer, or pay estimated taxes.

Question

Are underpayment penalties only applicable to the self-employed?

Forum|Forum|4 years ago
April 6, 2022
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JohnB5677

Yes, you can have an underpayment penalty if you don't have enough taxes withheld to cover the taxes that you owe.

The underpayment penalty may apply if :

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% 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.

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

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