Why would I owe a tax underpayment penalty?
To avoid underpaid taxes and a subsequent tax underpayment penalty, you should have paid taxes as you received income during the year through one of these methods:
- Withholding taxes from your paycheck
- Filing quarterly estimated payments
If you didn’t pay enough taxes during the year, you’ll have a balance due. You’ll also owe an underpayment penalty if both of these apply:
- Your balance due is more than $1,000.
- The tax you paid was less than the smaller of:
- 90% of your current tax liability
- 100% of your prior-year tax liability
- 110% of your prior-year tax liability if your adjusted gross income (AGI) last year was more than $150,000, or $75,000 if you and your spouse file separately.
To avoid this penalty in the future:
- Increase your W-4 withholdings with your employer.
- Pay quarterly estimated taxes using Form 1040-ES.
How long is a tax extension? Learn more about the additional amount of time you receive to file taxes from the experts at H&R Block.
IRS Letter 89C requests that you file an amended return. Learn more about this letter and how to handle it with help from the tax experts at H&R Block.
Here’s what could happen if you owe taxes and can’t pay them on time: You might face IRS penalties and interest. Even if you can’t pay by tax day, you should still file your return or at least file for a six-month extension. Then, review your options for how you can pay the IRS what you owe.
Nearing age 70? You might need to withdraw from your retirement plan soon. Review the IRS rules for required minimum distributions with H&R Block.