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Am I a possible target of an underpayment penalty? If so, is it possible for me to get a waiver?
Tax underpayment penalty is the penalty faced by many people during every taxation year. The Internal Revenue Service (IRS) will levy a tax underpayment penalty, when you have not paid enough of the estimated tax and withholding taxes. If you owe $1,000 or more in taxes, penalties or interest to the IRS while you file your return, it is possible that you will have to pay an underpayment penalty.
You may become a possible target for an underpayment penalty if you have not paid as much you owed last year or you have not paid at least 90 percent of total tax liability of the current year. On the contrary, you may not worry about underpayment penalty if you did not have any tax liability in the previous year or your underpayment is less than $1,000.
You can get a waiver for this penalty under two circumstances, which include -
You will have to submit the filled in 2210 form (Underpayment of Estimated Tax by Individuals, Estates and Trusts form) to IRS in order to request for a penalty waiver. The ideal way to avoid underpayment penalty is to withhold equal amount of taxes every year.
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