how to avoid an underpayment fine
the best way to avoid an underpayment penalty is to ensure that your taxes are fully paid on time to avoid an underpayment penalty individuals whose adjusted gross income agi is 150 000 or less must pay the lesser of 90 of the current year s tax or 100 of last year s tax by combining estimated and withholding taxes 1individuals whose agi for the preceding taxable year exceeds 150 000 must pay the lesser of 90 of the tax due for the current year or 110 of the tax on the individual s return for the prior taxable year 2the underpayment penalty is owed when a taxpayer underpays the estimated taxes or makes uneven payments during the tax year that do not correspond to the taxpayer s current income for a period 3a penalty will not be imposed if the underpayment penalty may also be waived for several other reasons including taxpayers with self employment income need to take into account their liability for social security and medicare taxes when calculating the amounts due some taxpayers such as sole proprietors partners and s corporation shareholders must pay taxes in four equal payments during the year although they can do so more frequently taxpayers who receive their income unevenly may be able to pay different amounts quarterly in some cases taxpayers can use irs form 2210 to determine if their payments of withholding and estimated taxes during the year are sufficient to avoid a penalty 3