With regards to income tax what is an under payment penalty?

Question

With regards to income tax what is an under payment penalty?

Answer 1

There are rules on how much of the tax you end up owing has to be paid in throughout the year, either from withholding, from quarterly estimated payments, or by letting a refund from the previous year be applied to the next year's taxes. If you don't pay in enough, you can be charged an underwithholding penalty. If you paid in at least 90% of what you end up owing, or paid in at least the total amount that you owed the previous year, you won't be penalized.

Answer 2

An underpayment penalty applies if the IRS feels that you did not pay enough in income taxes (either through withholding or estimated tax payments) during the year to cover your tax liability at the end of the year. Typically you have to owe more than $1000 when you file your tax return, but the rules vary depending on circumstances.

Answer 3

If you are suppose to be on a quarterly payment plan with the IRS for taxes (say for a dba or a small business) then this is the penalty you are charged for not filling those quarterly returns.

I am a small business and did not do mine last yr, for that I was docked a $52 under payment penalty fee.