3 IRS penalties to know about before April 15th

🚫 Underpayment of Estimated Taxes

𝗥𝗲𝗮𝘀𝗼𝗻: You don’t pay taxes evenly throughout the year.
𝗣𝗲𝗻𝗮𝗹𝘁𝘆: Annual interest of 8% on the underpaid amount for the number of days the payment is late.
𝗛𝗼𝘄 𝘁𝗼 𝗔𝘃𝗼𝗶𝗱: Your filed tax return shows you owe less than $1,000 OR You paid at least 90% of the tax shown on the return for the taxable year or 100% (110% for high-income taxpayers) of the tax shown on the return for the prior year, whichever amount is less.

🚫 Failure To Pay

𝗥𝗲𝗮𝘀𝗼𝗻: You don’t pay 100% of taxes owed by April 15th.
𝗣𝗲𝗻𝗮𝗹𝘁𝘆: The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won’t exceed 25% of your unpaid taxes.
𝗛𝗼𝘄 𝘁𝗼 𝗔𝘃𝗼𝗶𝗱: Pay 100% of taxes owed by April 15th.

🚫 Failure To File

𝗥𝗲𝗮𝘀𝗼𝗻: You don’t file your tax return (or an extension to file) by April 15th.
𝗣𝗲𝗻𝗮𝗹𝘁𝘆: The Failure to File penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won't exceed 25% of your unpaid taxes.
𝗛𝗼𝘄 𝘁𝗼 𝗔𝘃𝗼𝗶𝗱: File your tax return (or an extension to file) by April 15th.

Failure to file penalty should never happen.

Underpayment of estimated taxes likely only happens when you aren't working with a tax pro year-around.

Failure to pay is more common and likely won't hurt if it is just a few months, but don't let it get out of hand!