Underpayment Penalty


DEFINITION of 'Underpayment Penalty'

A tax penalty enacted on an individual for not paying enough of his or her total estimated tax and withholding. If an individual has an underpayment of estimated tax, they may be required to pay a penalty (on Form 2210).

BREAKING DOWN 'Underpayment Penalty'

To avoid an underpayment penalty you must pay either 100% of last year's tax or 90 percent of this year's tax by combining estimated and withholding taxes.

  1. IRS Publication 509: Tax Calendars

    A document published by the Internal Revenue Service that provides ...
  2. IRS Publication 505

    A document published by the Internal Revenue Service that outlines ...
  3. IRS Notice 433 - Interest and Penalty ...

    A document published by the Internal Revenue Service that outlines ...
  4. Audit

    1. An unbiased examination and evaluation of the financial statements ...
  5. 90-Day Letter

    An IRS notice sent after an audit stating that there was a discrepancy ...
  6. Withholding

    The portion of an employee's wages that is not included in his ...
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