One of the rules that the IRS has in regards to taxes is that everyone in Georgia and around the nation must pay their federal income tax throughout the year. Some workers may already have these taxes withheld from their paycheck while others who are self-employed may have to keep a better record of them. One of the things that the IRS looks for is whether you have paid the amount owed and not just a portion of it. If the IRS finds out that you have not paid what you owe, the organization will not only demand the rest of the funds immediately but will place an underpayment penalty on you. Read on to learn what exactly this penalty entails.
What exactly is an underpayment penalty?
The penalty is placed on individuals or business owners who have not paid the total amount of taxes owed at the end of the year. There are two criteria within the tax law that the IRS uses to determine if a penalty is warranted. One states that a penalty must be applied if the person paid less than 90%. The next one states that a penalty is warranted if you did not pay at least 100% of your owed taxes the year prior. In the event that you fall under these numbers, you will be asked to fill out an IRS Form 2210.
Can you waive the penalty?
Fortunately, there are ways to waive the penalty given to you by the IRS. If you can prove that you attempted to pay the total amount but were sidelined by death or serious illness in the family, then the IRS may waive the penalty. You may also ask the IRS to waive the penalty if you recently retired. Lastly, you may request a waiver of the penalty if you can prove that you were given misleading or incorrect advice regarding your taxes owed.
Navigating through these types of tax issues can be a daunting experience that leaves little room for error. It may be helpful to bring in an attorney who is familiar with tax laws to help you avoid common errors.