Underpayment penalties: How to avoid them and how to calculate them.

If you have a sufficiently large balance due when you file your return, your balance due may also include a penalty for not having enough taxes withheld or making estimated payments.
"Oversimplifying" Underpayment Penalties turned out to be a daunting task. This simple concept is surprisingly complex in execution, and most people let either the IRS or their software or preparer calculate them penalty for them. This video tells you when your balance due may be subject to a penalty, and then details the 12+ individual calculations that go into figuring out even the simplest of penalties.
To learn more about making estimated payments, click here: • Making Estimated Payme...
A couple of videos to help you understand your paycheck better:
"Your Paystub EXPLAINED!": • Your paystub EXPLAINED!
"How to Fill out a W4 (Revised and updated!): • How to fill out a W4 (...
If you're curious about other parts of the Tax Code that are more complicated than they need to be, click here:
0:00 Introduction
1:05 Who is liable for underpayment penalties
1:45 How to calculate an underpayment penalty
6:20 Optional calculations
6:39 Conclusion
Resources and Additional Information:
IRS Form 2210: "Underpayment of Estimated Tax by Individuals, Trusts, and Estates": www.irs.gov/pub/irs-pdf/f2210...
Although this form is rarely filed with a tax return, you can use it to see if you are liable for the penalty.
Instructions for Form 2210: www.irs.gov/pub/irs-pdf/i2210...
This publication contains the worksheet that is actually used to calculate the penalty, plus many other details regarding the penalty that I could not hope to cover in this video.
Investopedia: "Tax Underpayment Penalty: What It Is, Examples, and How to Avoid." www.investopedia.com/terms/u/...
Nerdwallet: "Underpayment Penalty: What It Is, How to Avoid It" www.merdwallet.com/article/ta...
The Tax Geek on the Site Formerly Known as Twitter: @taxgeekusa
The Tax Geek on Reddit: www.reddit.com/r/askataxgeek
Image and footage credits:
Storyblocks.com
Wikimedia Commons
No artificial intelligence was used to research, write, animate, voice, or edit this video
Intro Music: "Bluesy Vibes" - Doug Maxwell - UA-cam Creator Music
Outro Music: "Modern Attempt" - Track Tribe under license from UA-cam Creator Music
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.

[@TheSsqr]

Love you over simplified videos - Tax Geek . Hats off !

[@TheTaxGeek]

Thanks!

[@miguelcubero3440]

❤

[@EstrellaNegron]

Hi have another suggestion 😊 529 plan!

[@TheTaxGeek]

Good suggestion. Added it to the list. Look for it soon!

[@computerwizard1959]

This shows how much trouble this country is in when you have to pay taxes before you get the actual income. "Estimates" stink. Does anyone even know how much money the IRS collects each year from interest and penalities because most people can't figure out how much they owe in estimates?

[@TheTaxGeek]

Certainly not me. But what I really find astonishing is the insane number of calculations it takes to arrive at the penalty.