Well, that depends on whether you owe more taxes or not.

Calculating your federal income tax liability is the first step in figuring out your penalty. You must determine this by subtracting your actual tax payment from your entire tax burden, which includes both your withheld income tax and any additional taxes you may owe.

If your income tax bracket is higher, your actual tax payment will probably be lower than what is indicated on your return. For instance, if your tax rate is 10%, you may anticipate paying $1,000 in taxes. However, since your withholding amount is $200, if you paid $1,200, you would only be obliged to pay $800 in taxes.

Add your withholding amount to your income after dividing it by the appropriate tax rate to determine your real tax obligation. Consider the scenario when your overall tax liability is $1,500 and your withholding is $600. Your true tax obligation would be $1,500 (or $1,500 multiplied by 10%).

How to quickly compute tax penalties

Simply deduct your real tax from your total to determine your penalty. You will receive a number here that represents the entire amount of tax you owe but did not pay. You may calculate how many months it will take to pay off your penalty by dividing that amount by 12.

The penalty will probably be less if it must be paid in full within 30 days as opposed to if you have more time to pay. A $300 debt would therefore be paid off in five months ($300 / 12).

What transpires, though, if you are not required to pay the fine for another 60 days? Then, it will take an additional 10 months until your penalty is paid. You now need to find the correct amount of fines you’ll have to pay. You might anticipate a 15% penalty on the excess of your tax debt if it reaches $1,000.

Therefore, you would owe $180 if you owed $1,200. There would be a $30 fine for that. Therefore, you would have 60 days to pay that off.

If your tax burden is less than $1,000, you would only incur a $15 penalty on a $100 tax debt.

Additional Techniques for Calculating Penalty Fees

When filing a tax return beyond the deadline, there are several penalties. As a result, if you owe $100 in taxes and are also required to pay a $50 late filing penalty, your total debt will be $150.

A fine of up to $250, or 5% of the amount of the tax payable, may be imposed on those who submit their tax returns after the deadline. Depending on the length of the late filing and whether or not the late file was due to a justifiable cause, the IRS utilises a formula to calculate the penalty amount.

Find out here how to determine the fine.

Penalties Calculation

1. Time That You are Late for Filing

The day the IRS receives the return determines how long the filing was late. Therefore, if the file is due on April 15, there will be a five-day grace period. This would be the same if the filing deadline had been April 30. However, if the file is submitted after the deadline of January 31, there will be a four-month grace period.

2. Justification

If you have a good excuse for the late submission, that will establish whether or not you had reasonable cause. This covers situations like record loss or postal delivery difficulties. The IRS does not deem the following justifications to be valid explanations for a late submission, which is crucial to note:

Being unable to use a computer, the internet, or a printer

Inability to correctly fill out the tax form

obtaining the tax form slowly

3. Increasing the Penalty for Filing Late

The amount owing is typically increased by the late filing penalty. However, if the fine is greater than 10%, the debt will be reduced. If you owe $100 and must pay a $50 penalty, you will now owe $50 and will only be responsible for the original $100.

4. Amount Owed

The following formula is used to get the total amount owed:

Tax due: $100.

Fee assessed: $50

$150 total is owed.

If you owe a refund, owing less than $100, or have a low taxable income, you could be eligible for a refund if you file your taxes after the deadline.

5. Check all the Income Tax Forms

The IRS’s preferred income tax form is called Form 1040. The form is available for downloading at https://www.irs.gov/pub/irs-pdf/i1040.pdf.

You’ll need to pay any necessary costs, such as those for submitting a return. A direct debit mechanism is typically used to carry out this.

6. Predictions of Tax Payments

You must submit estimated tax payments by the 15th of each month in an amount equivalent to your tax liability.

In accordance with the quantity of withholding allowances they have claimed on their tax returns, self-employed people must also pay taxes.

How underestimating penalty is determined

You must pay a penalty if you underpay your taxes. Your underpayment amount is multiplied by ten to determine the penalty. In other words, you have a $10 underpayment on a $1,000 tax debt. You must pay a $10.00 fine.

By increasing the underpayment by ten, the penalty is determined. Therefore, if you owed $500 but only made a $250 payment, you would have a $250 underpayment. The fine is $25.00, or 10 times $250.

How does that function?

Therefore, you must pay the fine if you underpay.

You double the amount you underpaid by 10 since we are utilizing that amount to determine the underpayment. There are more elements that influence the penalty amount, but we won’t go through them now.

Consider that you made $200 in income but owing $800 in taxes. Your entire income is $1,000, and you have paid $800 in taxes. Calculating the underpayment yields the result: $200 – $800 = -$800.

Your shortfall is $800.

To calculate the fine, multiply this number by 10 times.

– $800 x.10 = – $80.00

You will be fined $80.00.

Let’s imagine you received a $90 underpayment.

$90 – $80 = -$10

Once more, the shortfall is $10.

To calculate the penalty, multiply the underpayment by ten.

– $10 x.10 = – $1.00

You will be fined $1.00.

What will the rate of underpayment penalties be in 2022?

For 2022, the penalty percentage is 2.5% of the amount you owe. For instance, the penalty rate is $2.50 for a $100 debt.

What is the Penalty’s Time Limit?

Three years after the day you first became obligated to pay the tax is the cutoff for making the penalty payment. For instance, you have until the end of 2022 to pay the fine if you owe $100 in 2019.

How Can the Underpayment Penalty Be Avoided?

You should prepare a payment strategy if you file a refund. A penalty that you are not compelled to pay can also be paid.

Tips to lower your Underpayment Penalty

By making an early tax payment, you might lower your penalty. You can lower the penalty rate by paying your taxes early. You pay your fine either online or through a check as well. By paying the entire amount of tax you owe, you can avoid the penalty.

For 2021, is the underpayment penalty waived?

Any income tax return that is due for the 2020 tax year or for a return filed for a previous year that is filed on or before January 1, 2021, is exempt from this waiver (2019). Taxpayers who owe $50 or less in unpaid taxes for either the current tax year or the preceding tax year will not be subject to the penalty.

Are Form 1040, 1040A, 1040-ES, 1040X, and amended forms submitted for preceding years covered by the waiver?

Yes. Regardless of whether the return is due for the current year or a return for a previous year, the penalty will be eliminated for any income tax return for the taxable year commencing on January 1, 2021.

What about taxpayers who filed Forms 1040, 1040A, 1040EZ, 1040X, or modified forms in 2018 but underpaid their taxes?

Individuals who submit a Form 1040, 1040A, 1040EZ, 1040X, or amended return for the 2018 tax year and whose total income tax due for the current tax year exceeds $50,000 are not eligible for this waiver.


The consequences for failing to pay taxes on time are intricate. Many people who work in finance aren’t familiar with the various computations or how they’re done. Furthermore, many accounting professionals are unaware that the penalties for underpaying anticipated taxes differ from those for underpaying actual taxes. You can use the one-stop tax shop like FlyFin to accurately file your tax returns and get access to a lot of tax tolls for independent contractors or self-employed individuals.

By zestful