Underpayment of Estimated Tax by Individuals Penalty

 

The Underpayment of Estimated Tax by Individuals Penalty for Individuals applies 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 on Underpayments and Overpayments.

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:

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

If you're a farmer or fishermen, follow these special rules:

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

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