Underpayment Tax Penalty

[LastOfTheBoomers]

I didn’t pay enough taxes for 2017 - so I owed a $21 penalty - I picked the “Have the IRS figure the amount and send me a bill” option.

Just wondering if anyone who owed a penalty and picked this option has gotten a bill yet?

 

[COcheesehead]

I only had a penalty once and I paid it at the time I filed. One less thing to deal with later.

 

[athena53]

I use TurboTax and let it calculate the amount so I can add it to my taxes- I assume that since the penalty is partly a function of time, it increases as you wait for the IRS to bill you (not that that adds a lot to a $21 penalty).

I'm a chronic underpayer- it's always something. Mutual funds throw out unexpectedly high CG distributions (yeah, I know, that's good news). The gurus behind my sector rotation funds decide on occasion to sell one ETF and buy another, sometimes realizing large gains. 2017 was my first full year of being widowed; that cut personal deductions/exemptions. I expect to get hit with more taxes due to the changes for 2018 and the increased standard exemption is useless to me- much bigger impact for couples. I do what I can to make sure my estimated payments are reasonable compared to the previous year's liabilities but am reluctant to give much to the government interest-free.

 

[karen1972]

I underpaid and my penalty was $14, but I just paid it, as I don't want to be "waiting" for a bill which of course if you miss is never their mistake...too much risk for having to pay more than expected.

On a side note, I did get notified by the State about 3 weeks ago. They sent me a nasty note and bill for failure to pay and after calling realized I had fat fingered my serial number in the early payment so my money was sitting credited to some other random person.

 

[athena53]

On a side note, I did get notified by the State about 3 weeks ago. They sent me a nasty note and bill for failure to pay and after calling realized I had fat fingered my serial number in the early payment so my money was sitting credited to some other random person.

I once had the state disallow one of my estimated payments; I looked up the image of the check on my bank Web site and found that I'd committed the grievous error of not putting my SSN in the Memo line. I guess it was too much trouble to figure out whose check it was based on the attached form and my name and address on the check. Not too much trouble to clear up, though.

 

[Souschef]

I had a small underpayment penalty to CA. I paid 25% quarterly, but for some reason the CA schedule is 30%,40%,0%,30%.. I have adjusted my payments this year to match

 

[EastWest Gal]

If you wait for a bill, it could take months. Then they may charge you interest. Pay it and be done. Been there with DS due to a FP then IRS screw up. A few $ overpaid is worth peace of mind.

 

[LastOfTheBoomers]

When I was doing the taxes - I started the Form 2210 - and then got to this section:

The IRS Will Figure the Penalty for You
If you didn't check box B, C, or D in Part II, you don't need to figure the penalty. The IRS will figure any penalty for underpayment of estimated tax and send you a bill. If you file your return by April 17, 2018, no interest will be charged on the penalty if you pay the penalty by the date shown on the bill. If you want us to figure the penalty for you, complete your return as usual. Leave the penalty line on your return blank; don't file Form 2210.

So according to the iRS - I will only get a bill for $21

So far it looks like no one else took this option!

It was a few pesky LTCG that put me over the top - and I was concentrating on prepaying Prop Taxes - and everything else by the end of 2017 - I will be more conscious of making a Estimated Payment in January to make sure this doesn’t happen again.

 

[Amethyst]

CG distro's usually come out in December. Why not re-estimate your taxes right away in January, and just send the IRS some extra $$ then? Jan. 15th is when final quarterly estimate tax is due - even if you don't pay QET, it should be acceptable to send some extra cash by Jan 15th.

 

[LastOfTheBoomers]

CG distro's usually come out in December. Why not re-estimate your taxes right away in January, and just send the IRS some extra $$ then? Jan. 15th is when final quarterly estimate tax is due - even if you don't pay QET, it should be acceptable to send some extra cash by Jan 15th.

Exactly what I plan to do - just messed up this year - or should I say last year.

 

[gauss]

I generally try to ensure that my withholding each year is at least as much as 100% of the prior year's total tax.

I then qualify for the safe harbor to avoid under withholding penalty.

-gauss

 

[nwsteve]

For those of us now taking RMD's, you can hold-off taking a portion of your RMD till late in the year and then run your tax estimates and assign as much of your RMD as necessary to cover the taxes expected plus a smig more ;-). IRS treats RMD's like withholding so payment treated as it was paid equally over the year. Or just pay the safe harbor amount of last year's final tax amount.

 

[scrabbler1]

I have zero taxes withheld because all of my income is investment income from my mutual funds. Unless I get some monster distribution before December, I make a single estimated tax payment (1 for state, 1 for federal) by January 15th. I pay about half of what I owe overall unless I am already in a safe harbor. Perhaps I am flying under the radar but I never had the IRS coming after me. I do make sure my April payment is less than $1,000 unless I am already in a safe harbor, too.

 

[Texas Proud]

Well, I will chime in since you posted nobody has taken this option... that would be false...


I have a few times... all when the penalty was very low... no bill showed up... however, my mom and sister has had the problem the past few years and I just leave it on the return and pay it... not worth waiting to see if you get a bill and when for $38 and $34 for my mom...



We will probably have another this year even though we have tried to change her withholding.... I do not want to take the time to send in qtrly payments... penalty is cheap IMO...

 

[LastOfTheBoomers]

Well, I will chime in since you posted nobody has taken this option... that would be false...


I have a few times... all when the penalty was very low... no bill showed up... however, my mom and sister has had the problem the past few years and I just leave it on the return and pay it... not worth waiting to see if you get a bill and when for $38 and $34 for my mom...



We will probably have another this year even though we have tried to change her withholding.... I do not want to take the time to send in qtrly payments... penalty is cheap IMO...

Thanks for posting a reply! I figured if it was under $50 the IRS would not bother sending a bill.

If I ever get a bill - I will follow up.