Question

If I'm getting money refunded, why would I owe an IRS underpayment penalty?

Answer

The IRS calculates underpayment penalties separately for each of the four periods of the year. This means you can end up owing a penalty for an earlier payment period even if you paid enough later in the year to make up for it. To avoid this, and the need to complete Form 2210, you must make accurate estimated payments for the tax year by these dates:

  • April 15
  • June 15
  • Sept. 15
  • Jan. 15

If your income changed throughout the year, you could lower or eliminate one or more estimated payments. To do so, use the annualized income installment method on Form 2210.

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