Underpayment of Estimated Tax by Individuals Penalty

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 understand that circumstances—such as a serious illness or injury, a family member's death, or similar circumstance beyond your control—may make it difficult for you to meet your estimated tax payment obligation in a timely manner. While the penalty for underpayment of estimated tax generally cannot be waived for any such reason, 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).

The penalty for underpayment of estimated tax can also be removed to the extent that the underpayment is the result of a casualty, local disaster, or other unusual circumstance such that it would not be fair to impose the penalty.

• If you think you qualify for a waiver of the penalty under any provision explained above, please send your written explanation, signed under penalty of perjury, to us at the address at the top of this notice.

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 include individuals, estates, and trusts with at least two-thirds of their gross annual income from farming or fishing in either the current or preceding tax year, complete Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen to see if you owe a penalty for underpaying estimated tax.

Qualifying farmers and fishermen can an avoid making any estimated tax payments by filing and paying their entire tax due on or before March 1. Those who choose not to file by March 1 should make an estimated tax payment by Jan. 15 to avoid an estimated tax penalty. The required annual payment is the smaller of:

•  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.

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