Underpayment Penalty

IRS Definition

The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.

More from H&R Block

If you didn’t pay enough taxes during the year by withholding taxes from your paycheck or by making estimated tax payments, the IRS may charge you a penalty for underpayment of your estimated taxes. This penalty can be avoided if:

  • You owe less than $1,000 in tax, or
  • You paid at least 90% of the tax you owe for the current year, or you paid 100% of the tax you owed for the prior year (whichever is less)

The penalty for not paying your tax balance in full by the filing deadline is called the failure to pay penalty.

Learn how to address an IRS penalty.

Get help from an expert

Your local H&R Block tax pro can look into your issue and deal with the IRS for you.

Schedule a Free Consultation

Or call 855-536-6504

Related Information

How to Address IRS Penalties

Learn how to address and understand an IRS tax penalty from the tax experts at H&R Block.

What To Do When You Have an Estimated Tax Penalty

Learn more about your options to reduce or remove an IRS estimated tax penalty. Get the facts from the tax experts at H&R Block.

The Four Types of IRS Penalty Relief – and How to Know What’s Best for You

Get the facts from H&R Block about the four types of IRS penalty relief, and which IRS penalty relief option may be best for your situation.

The IRS Offers Alternatives When You Can’t Pay Your Tax Bill

Get the facts from H&R Block about IRS payment options when you can't pay your tax bill, including short-term extensions, monthly payment plans, and more.

What’s the Best Way to Pay Your Tax Bill

You have options when you owe taxes. Get the facts about the best way to pay your tax bill with help from the experts at H&R Block.