The Underpayment of Estimated Tax by Individuals Penalty applies to individuals, estates and trusts if you don't pay enough estimated tax on your income or you pay it late. The penalty may apply even if we owe you a refund. Find how to figure and pay estimated tax. How You Know You Owe the Penalty We send you a notice if you owe the Underpayment of Estimated Tax by Individuals Penalty. For more information, see Understanding Your IRS Notice or Letter. How We Calculate the Penalty We calculate the amount of the Underpayment of Estimated Tax by Individuals Penalty based on the tax shown on your original return or on a more recent return that you filed on or before the due date. The tax shown on the return is your total tax minus your total refundable credits. We calculate the penalty based on: The amount of the underpayment The period when the underpayment was due and underpaid The interest rate for underpayments that we publish quarterly Interest on a Penalty We charge interest on penalties. The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest. Pay a Penalty Send us a payment or pay your estimated taxes in full on time to stop future penalties and interest from adding up. Remove or Reduce a Penalty We may remove or reduce a penalty for failure to pay your estimated taxes in limited circumstances: We may reduce a penalty if any of the following apply: You or your spouse (if you file a joint return) retired in the past 2 years after reaching age 62 or became disabled and you had reasonable cause to underpay or pay your estimated tax late. See Waiver of Penalty in Instructions for Form 2210PDF. You had most of your income tax withheld early in the year instead of spreading it equally through the year. Complete Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and TrustsPDF. Your income varies during the year. Complete Form 2210, Schedule AI, Annualized Income Installment Method PDF(found within the form). Dispute a Penalty If you don’t qualify for penalty removal or reduction due to retirement or disability, we can't adjust the Underpayment of Estimated Tax by Individuals Penalty for reasonable cause. We may consider making an adjustment if we imposed the penalty after you relied on incorrect written advice we gave you. Check if you meet the following criteria: The written advice we gave you was in direct response to your written request for advice The incorrect written advice we gave you was not the result of material omissions or misinformation in your written request for advice You reasonably relied on our written advice and were penalized based on that advice If you believe you meet the criteria, mail a statement signed under penalty of perjury that describes how our erroneous written advice resulted in the penalty. Include a copy of both the written request for advice you sent us and our written response. Mail the original statement and copies of the supporting documents to the address on your penalty notice. Keep a copy of the documents you send to us. When you sign a statement under penalty of perjury, you may be found guilty of a crime if you knowingly lie in your statement. Avoid a Penalty To avoid a penalty, pay your correct estimated taxes on time. Find how to figure and pay estimated taxes. You may avoid the Underpayment of Estimated Tax by Individuals Penalty if: Your filed tax return shows you owe less than $1,000 or You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. Special Rules for Farmers and Fishermen Qualifying farmers and fishermen must pre-pay only two-thirds (66.67%) of their tax, or 100% of the tax shown on the tax return for the prior year, whichever amount is less. For more information, see Farmers and Fishermen in Publication 505, Tax Withholding and Estimated Tax. Qualifying farmers and fishermen include individuals, estates, and trusts with at least two-thirds of their gross annual income from farming or fishing, complete Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen to see if you owe a penalty for underpaying estimated tax. Apply for a Payment Plan If you can't pay the full amount of your taxes on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan. Get Help For help with a penalty, call the phone number on your notice or letter. If you didn’t receive a letter or notice, use telephone assistance. Law and Regulations Failure by an Individual to Pay Estimated Income Tax — Internal Revenue Code § 6654 Additions to Tax for an Individual — Estimated Tax — 26 Code of Federal Regulations § 1.6654-1 Exceptions to the Imposition of Penalties for Underpayment of Estimated Tax — Individuals — 26 Code of Federal Regulations § 1.6654-2 Related Topics Special Filing Season Alerts IRS Operations Status Estimated Taxes Pay As You Go, So You Won’t Owe: A Guide to Withholding, Estimated Taxes, and Ways to Avoid the Estimated Tax Penalty Gig Economy Tax Center Self-Employed Individuals Tax Center Taxpayer Bill of Rights Publications Publication 505, Tax Withholding and Estimated Tax Publication 1, Your Rights as a TaxpayerPDF Need Help? You can authorize someone to contact the IRS on your behalf. See if you qualify for help from a Low Income Taxpayer Clinic. If you can’t find what you need online, call the IRS number at the top of your notice or letter. If you didn’t receive a letter or notice, use telephone assistance. If you can't resolve the penalty on your own, contact Taxpayer Advocate Service, an independent organization within IRS.
