Tax Underpayment Penalty
- Taxes are “pay-as-you-go”. Payment of taxes should roughly match timing of income. If it doesn’t, there may be the dreaded Underpayment Penalty.
- Officially, the penalty is named: The Underpayment of Estimated Tax by Individuals Penalty (UOETBIP).
- IRS will notify TP by mail if there is an UOETBIP.
- Avoid the penalty if:
- You owe less than $1000.
- You paid at least 90% of the tax shown on the return for the taxable year or, if less…
- You paid 100% of the tax shown on the return for the prior year. (If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%.)
- Compute the penalty on Form 2210.
- Instructions for Form 2210. 10 pages.
- Paying by April 15 may reduce the likelihood of an underpayment penalty. (IMHO)
TaxLinx 11/30/2025
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