Exceptions(p55)

Generally, you do not have to pay an underpayment penalty if either:

• Your total tax is less than $1,000, or
• You had no tax liability last year.

You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000.

For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following.

1. Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57).
2. Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans.
3. The following write-ins on line 60:
   1. Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance,
   2. Tax on excess golden parachute payments,
   3. Excise tax on insider stock compensation from an expatriated corporation,
   4. Look-back interest due under section 167(g),
   5. Look-back interest due under section 460(b),
   6. Recapture of federal mortgage subsidy, and
   7. Additional tax on advance payments of health coverage tax credit when not eligible.
4. Any refundable credit amounts listed on lines 64a, 65, 66, and 70, and credits from Forms 8801 (line 27 only) and 8885 included on line 71.

If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40.

If you filed Form 1040EZ, your 2012 total tax is the amount on line 10 reduced by the amount on line 8a.

For 2012, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Add to that any write-in amount on line 72 identified as "Form 8689." On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. On Form 1040EZ, it is the amount on line 7.

You do not owe a penalty if you had no tax liability last year and you were a U.S. citizen or resident for the whole year. For this rule to apply, your tax year must have included all 12 months of the year.

You had no tax liability for 2011 if your total tax was zero or you were not required to file an income tax return.

Ray, who is single and 22 years old, was unemployed for a few months during 2011. He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. He had no other income. Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,500 for 2011). He filed a return only to have his withheld income tax refunded to him.

In 2012, Ray began regular work as an independent contractor. Ray made no estimated tax payments in 2012. Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2012 because he had no tax liability in 2011.

For 2011, your total tax on Form 1040 is the amount on line 61 reduced by the following.

1. Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57).
2. Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans.
3. The following write-ins on line 60:
   1. Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance,
   2. Tax on excess golden parachute payments,
   3. Excise tax on insider stock compensation from an expatriated corporation,
   4. Look-back interest due under section 167(g),
   5. Look-back interest due under section 460(b),
   6. Recapture of federal mortgage subsidy, and
   7. Additional tax on advance payments of health coverage tax credit when not eligible.
4. Any refundable credit amounts listed on lines 64a, 65, 66, 67, and 70, and credits from Forms 8801(line 27 only), 8839, and 8885 included on line 71.

If you filed Form 1040A, your 2011 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40.

If you filed Form 1040EZ, your 2011 total tax is the amount on line 11 reduced by the amount on line 8a.