Tax Strategy Consulting Oak Brook - Dodge underpayment tax penalty
Are you in danger of owing a penalty for underpaying taxes in 2025? There's still time to right the ship.
The IRS imposes penalties on taxpayers who don't pay enough tax throughout the year through withholding or estimated payments. The penalty is essentially interest charged on the underpayment.
Strategies to avoid the penalty:
- Increase your withholding - If you're employed, ask your employer to withhold more from your remaining paychecks
- Make an estimated payment - You can make a fourth-quarter estimated payment by January 15, 2026
- Use the safe harbor rule - Pay at least 100% of last year's tax (110% if your AGI exceeds $150,000)
- Annualize your income - If your income is uneven throughout the year, you may be able to reduce your penalty using the annualized income installment method
Don't wait until April to discover you owe a penalty. Take action now to minimize your exposure.
Need Tax Help?
Contact QTA Consultants for expert tax guidance tailored to your needs.
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