Underpay Penalty Question


T

Tango

I sold some stock for profit which caused me to underestimate my tax
payment. Turbo Tax says I will have to pay a penalty but they don't know
how much. Total rip-off! Anyway, about what % penalty can I expect on
owing the IRS $2,000?

Thanks,
Tango
 
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P

Paul Thomas, CPA

Tango said:
I sold some stock for profit which caused me to underestimate my tax
payment. Turbo Tax says I will have to pay a penalty but they don't know
how much. Total rip-off! Anyway, about what % penalty can I expect on
owing the IRS $2,000?



Start first by seeing if you actually owe any penalty at all. If you met
one of the safe-harbors, you'll not owe any penalty no matter how much you
have to write a check for with this years return.

How much was last years "Total Taxes"? By that I mean, what was the number
on Line 63 of your 2005 Form 1040.

If your 2006 withholding and/or estimated tax payments were more than that
amount (10% more if your AGI is over $150,000), you owe no penalty for
underpayment.
 
J

Jim Kingdon

Start first by seeing if you actually owe any penalty at all. If you met
one of the safe-harbors, you'll not owe any penalty no matter how much you
have to write a check for with this years return.
(I assume we're talking about not paying enough estimated tax on form
1040-ES).

Also note that one of the items in the penalty formula is when you
send in this year's return with the check. So the sooner you can do
this, the better off you are.

Last time I did this, I just picked the "let the IRS compute the
penalty" option (which involved doing nothing, if I remember right),
and they apparently didn't compute any penalty because I never heard
from them. The actual penalty formula was pretty complicated, I do
remember that much. But given the "number of days before April 15
part", it kind of looked to me like my penalty was probably going to
end up zero, in my case.
 
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T

Tango

Thanks Paul & Jim,

My line 63 is $15,543. I would have been right on except I sold some stock
amd made a nice profit. I was going to hold off and pay at the last minute
but I will take Jims lead and pay as soon as I get all my papers. The last
is trickling in.

Thanks,
Tango
 

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