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Underpayment Penalty

What is '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).

Explaining '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.


Further Reading


Cheating ourselves: The economics of tax evasion
www.aeaweb.org [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

Are public sector workers underpaid in Russia? Estimating the public-private wage gapAre public sector workers underpaid in Russia? Estimating the public-private wage gap
papers.ssrn.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

Globalisation and developing countries–a shrinking tax base?Globalisation and developing countries–a shrinking tax base?
www.tandfonline.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

Underpayment of wages and wage distortion in China: an empirical assessment of the 2003–2008 periodUnderpayment of wages and wage distortion in China: an empirical assessment of the 2003–2008 period
www.tandfonline.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

The collection efficiency of the Value Added Tax: Theory and international evidenceThe collection efficiency of the Value Added Tax: Theory and international evidence
www.tandfonline.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

The Economic Substance DoctrineThe Economic Substance Doctrine
search.proquest.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …

Strategies to reduce contribution evasion in social security financingStrategies to reduce contribution evasion in social security financing
www.sciencedirect.com [PDF]
… Program evaluation. Behavioral and personnel economics. Migration and ethnicity. Labor markets and institutions. Transition and emerging … Are part-time workers less productive and underpaid … is not yet clear, part-time work is often accompanied by a wage penalty, a result …



Q&A About Underpayment Penalty


What does "combining" mean in this case?

Combining means adding together.

When does an individual have to pay this penalty?

An individual has to pay this penalty if he or she did not make enough payments during the year.

Who pays the penalty for underpayment of estimated tax?

Individuals, estates, and trusts pay the penalty for underpayment of estimated tax.

What is the penalty for underpayment of estimated tax?

The penalty for underpayment of estimated tax is 20% per year.

When do you need to make payments for the current year in order to avoid the underpayment penalty?

You need to make payments for the current year in order to avoid the underpayment penalty before April 15th.

How much is a payment considered to be?

A payment is considered to be 100% of what was owed in that quarter. If you owe $1,000 in taxes and only paid $500 in one quarter then you would owe $200 as a result. This would add up over time so it's important to keep track of your payments and make sure they are accurate.

How much must you pay to avoid the underpayment penalty?

Individuals must pay either last year's tax or 9 percent of this year's taxes by combining estimated and withholding taxes.

What is an underpayment penalty?

An underpayment penalty is a tax penalty enacted on an individual for not paying enough of his or her total estimated tax and withholding.

Who may be required to pay a penalty if they have an underpayment of estimated tax?

If individuals have an underpayment of estimated tax, they may be required to pay a penalty (on Form 221).