Estimated Tax Penalty?

Estimated tax penalties apply when you underpay your taxes.

Taxpayers who paid too little tax during 2021 can still avoid a surprise tax-time bill and possible penalty by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2021 is Tuesday, January 18, 2022.

Remember, Income taxes are pay-as-you-go. This means that you need to pay most of your tax during the year as income is earned or received. There are two ways to do this:

(1) Withholding from your paychecks, pension payments, and some government payments, such as Social Security benefits or unemployment compensation. Most people pay their taxes this way. And,

(2) Making quarterly estimated tax payments throughout the year to the IRS. Self-employed people and investors, among others, often pay their taxes this way.

Talk with a Tax Pro if you have a question about your tax payments and/or if you need to make estimated tax payments.