The IRS charges an estimated tax penalty when a person fails to pay estimated taxes on time. Individuals must pay estimated taxes on income not subject to automatic withholding. Waivers may be granted in certain circumstances. The penalty can be calculated using Form 2210 or by hiring an accountant.
An estimated tax fine is a fine that the Internal Revenue Service (IRS) or other tax collection agency charges when a person pays estimated taxes or fails to pay these taxes on time. Individuals must pay estimated taxes on income that is not subject to automatic withholding such as self-employment income or interest income. The purpose of the estimated tax penalty is to get people to pay taxes voluntarily. Some situations may allow a person to obtain a waiver to avoid having to pay this penalty.
In the United States, residents must pay taxes on their income as it is earned or received. Normally, an employer withholds certain taxes from an employee’s income and submits them to the IRS. This is not the case with all types of earnings. In general, no one automatically withholds taxes on self-employment income, interest, dividends, rental income, alimony, or other types of earnings. This income may be subject to tax, which means that the person receiving it must pay estimated taxes on it or face an estimated tax penalty.
To avoid the fine in the United States, a person must pay taxes on time and in the correct amount. Estimated taxes are due on the 15th of April, June, September and January. Taxes are due on time for each tax period, which means you can’t make up for a non-payment in one period by paying extra in a later period. A late payment or underpayment results in an estimated tax penalty.
The IRS sometimes grants waivers from the estimated tax penalty in certain circumstances. For example, a person may be eligible for a waiver if he or she has suffered an accident, disaster or faced a serious circumstance which has prevented him from making the payment. Also, if a person suffers from a disability or retires after reaching the age of 62 in the previous year or in the year in which the estimated taxes were due, he or she may be eligible for a waiver. Individuals must file a special form available through the IRS to request a waiver. In essence, the waiver of the estimated tax penalty is to prevent injustice against individuals who have failed to make payments due to circumstances beyond their control.
The IRS provides Form 2210 to calculate the estimated tax penalty. It is a complex shape; Instead, taxpayers may choose to allow the IRS to calculate the penalty and send them a bill for the penalty. Of course, anyone can also hire an accountant to do the math. A tax professional is also likely to know how to help structure your tax payment to avoid the expected tax penalty in the future.
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