Estimated Tax Penalty
Definition
A penalty charged when you don't pay enough tax throughout the year via withholding or estimated tax payments. You generally owe the penalty if you owe at least $1,000 when you file and you paid less than 90% of this year's tax or 100% of last year's tax (110% if your AGI exceeded $150,000). The penalty is calculated as interest on the underpayment.
Example
If you owe $5,000 when you file and didn't make estimated payments, you might face a penalty of approximately $200-400 depending on how long the tax was underpaid.
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