skip navigation

Search Help
Navigation Help


Main Topics
A B C D E F G H I
J K L M N O P Q R
S T U V W X Y Z #


FAQs
Forms
Publications
Tax Topics


Comments
About Tax Map

previous pagePrevious Page: Recordkeeping
next pageNext Page:  Backup Withholding
 Use previous pagenext page to find additional instances of index items.

rule
Rev. date: 07/2006


Penalty for Underpayment of Estimated Tax

spacer

previous topic occurrence Estimated Tax next topic occurrence
previous topic occurrence Penalty for Underpayment next topic occurrence

Tele-Tax Topic 306
rule
spacer

The United States income tax is a pay-as-you-go tax, which means that tax must be paid as you earn or receive your income during the year. You can either do this through withholding or by making estimated tax payments. If you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will have paid enough tax to avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, 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. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.
Generally, the payments should be made in four equal amounts to avoid a penalty. However, if you made unequal payments because your income was received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income. Use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you owe a penalty for underpaying your estimated tax.
The penalty may be waived if:
  1. The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
  2. You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.
Please refer to the Instructions 1040 (General Inst.) or the Instructions 1040-A for where to report the estimated tax penalty on your return.
previous pagePrevious Page: Recordkeeping
next pageNext Page:  Backup Withholding
 Use previous pagenext page to find additional instances of index items.