Underestimate and Late Payment Penalties
Taxpayers are required to have withholding of tax or make quarterly estimated tax payments before the end of the tax year. Since accurate estimation requires accurate prediction of the future, taxpayers may underestimate the amount due. The penalty for paying too little estimated tax or having too little tax withheld is computed like interest on the amount that should have been but was not paid. For 2009, this interest rate was 4%.
Where a taxpayer has filed an income or excise tax return that shows a balance due but does not pay that balance by the due date of the return (without extensions), a different charge applies. This charge has two components, first an interest charge, computed as described above, and second a penalty of 0.5% per month applied to the unpaid balance of tax and interest. The 0.5% penalty is capped at 25% of the total unpaid tax.
The underestimate penalty and interest on late payment are automatically assessed. No reasonable cause exception applies for these penalties.
Read more about this topic: IRS Penalties
Famous quotes containing the words late, payment and/or penalties:
“Lizzie Borden took an axe
And gave her mother forty whacks;
When she saw what she had done,
She gave her father forty-one.”
—Anonymous. Late 19th century ballad.
The quatrain refers to the famous case of Lizzie Borden, tried for the murder of her father and stepmother on Aug. 4, 1892, in Fall River, Massachusetts. Though she was found innocent, there were many who contested the verdict, occasioning a prodigious output of articles and books, including, most recently, Frank Spiering’s Lizzie (1985)
“There are always those who are willing to surrender local self-government and turn over their affairs to some national authority in exchange for a payment of money out of the Federal Treasury. Whenever they find some abuse needs correction in their neighborhood, instead of applying the remedy themselves they seek to have a tribunal sent on from Washington to discharge their duties for them, regardless of the fact that in accepting such supervision they are bartering away their freedom.”
—Calvin Coolidge (1872–1933)
“I’ve got to go. That’s one of the penalties of being a doctor. I never seem to finish a conversation.”
—Robert M. Fresco, and Jack Arnold. Dr. Matt Hastings (John Agar)