{"id":35896,"date":"2018-03-21T15:37:35","date_gmt":"2018-03-21T20:37:35","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/?p=35896"},"modified":"2020-06-09T15:13:33","modified_gmt":"2020-06-09T20:13:33","slug":"what-to-do-estimated-tax-penalty","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/tax-center\/irs\/audits-and-tax-notices\/what-to-do-estimated-tax-penalty\/","title":{"rendered":"What To Do When You Have an Estimated Tax Penalty"},"content":{"rendered":"

People who file and owe may face the most common IRS penalty \u2013 the estimated tax penalty. The IRS assessed this penalty on more than 10 million people last year.<\/p>\n

Why is it a problem to file and owe? Because our tax system is \u201cpay as you go.\u201d That means you should be making tax payments on your income as you earn it throughout the year. And if you don\u2019t (because you didn\u2019t withhold enough from your paycheck, or you didn\u2019t make enough in estimated tax payments), the IRS will charge you an estimated tax penalty.<\/p>\n

This penalty is especially common among people who are self-employed, retired, or who have investments, because they must proactively make estimated payments each quarter. It\u2019s also common among people who don\u2019t withhold enough taxes from their paycheck. Many of them don\u2019t know about the responsibility until they get hit with a tax bill and a penalty.<\/p>\n

The good news is that the estimated tax penalty is pretty mild. It equates to a reasonable interest rate (the IRS interest rate as of April 2018 is 5%), charged for \u201cborrowing\u201d your underpaid funds from the government.<\/p>\n

Best course: request a waiver when you file<\/h2>\n

It\u2019s always best to request an estimated tax penalty waiver when you file your return, rather than waiting until the IRS has assessed the penalty.<\/p>\n

You may have a couple options:<\/p>\n

First, you may be able to use a different method to calculate the penalty if your income was unevenly distributed throughout the year.<\/p>\n

Second, you may qualify for a waiver that will remove all or part of the penalty, if:<\/p>\n