how the fine works
taxpayers must pay the difference plus a penalty that is calculated based on the outstanding amount owed and how long the amount has been overdue the penalty isn t a static percentage or a flat dollar amount it s based on several factors including the total underpayment amount and the period during which taxes were underpaid underpayments are subject to the failure to pay penalty which is 0 5 of the amount owed for each month and the part of a month for which the tax is not paid 4the underpayment failure to pay penalty is capped at 25 of the unpaid amount 4tax underpayments and overpayments accrue interest as well the irs determines the interest rate every quarter generally basing it on the federal short term rate plus three percentage points for most taxpayers the rates were 8 for individual underpayments and 7 for large corporate underpayments for the fourth quarter q4 of 2023 and the first quarter q1 of 2024 56example of an underpayment penaltyif you owed 5 000 in taxes for the year but only paid 2 000 you would have underpaid your taxes by 3 000 you paid less than 90 of what you owed so you would be subject to an underpayment penalty the penalty would be the federal short term rate at the time plus three percentage points that would add up to about 8 or 240 as of mid 2024 special considerationsyou may qualify for a reduced underpayment penalty even if you don t qualify for the exceptions to the underpayment penalty for example an individual who changes their tax filing status from single to married filing jointly may get a reduced penalty due to the larger standard deduction a reduction might also be extended to taxpayers who generate significant portions of their income late in the calendar year for example if a taxpayer sold an investment in december triggering a substantial capital gains tax the penalty might not be applied 7sometimes the irs might make an error in assessing interest or a penalty against a taxpayer taxpayers can file form 843 to request the correction of the error 