How To Calculate The Penalty For Not Paying The Estimated Tax

Quarterly estimated taxes are a must for self-employed individuals, freelancers, independent contractors and small business owners. If you don’t pay estimated taxes you’ll attract IRS tax penalties.

The first stage in determining your penalty is to calculate your federal income tax obligation. Your real tax payment will likely be less than what is shown on your return if your income tax rate is greater. If your tax percentage is 10%, for example, you might plan to pay $1,000 in taxes. You would only be required to pay $800 in taxes if you paid $1,200 because your withholding sum is $200.

To calculate your actual tax liability, multiply your income by the applicable tax percentage, then add your withholding sum. Take into account the case where your total tax obligation is $1,500 and your deduction is $600. Your actual tax liability would be $1,500 (or $1,500 times a factor of 10%).

There are several IRS forms like the Schedule C of Form 1040 that you need to complete correctly to find your accurate tax liability. But before you even get to the Schedule C you’ll have to find your estimated taxes using a 1099 tax calculator. If you live in a certain state, you’ll have to use state-specific tax calculators like New York tax calculator, California tax calculator or Texas tax calculator. or Hire Tax Preparation expert.

How to calculate tax fines fast?

To calculate your punishment, simply subtract your actual tax from your total. The total quantity of tax you due but have not paid will be represented by a number that you will be given here.

But what happens if you have another 60 days before you have to pay the fine? After that, it will be another 10 months before your punishment is settled. Find the proper fee amount that you will be required to pay now. If your tax bill exceeds $1,000, you may be subject to a 15% penalty on the extra.

Therefore, if you owed $1,200, you would owe $180. For that, there would be a $30 charge. As a result, you would have 60 days to settle that.

On a $100 tax bill, you would only be charged a $15 penalty if your tax load is less than $1,000.

Additional Methods for Determining Penalty Amounts

Therefore, if you incur $50 in late filing fees in addition to $100 in taxes, your overall obligation will be $150.

Those who file their tax returns after the due date may be subject to a fee of up to $250 or 5% of the amount of the tax due.

Learn more about calculating the fee here.

Calculation of Penalties

1. The Period of Lateness for Filing

How long the submission was late is determined by the day the IRS gets the return. Therefore, there will be a five-day grace time if the submission is due on April 15. If the reporting date had been April 30, this would still be the case. There will be a four-month grace time if the paperwork is filed after the deadline of January 31.

2. The Reason you Filed Late

If you can demonstrate a solid explanation for the late submission, that will prove whether or not you had a valid justification. This includes issues with mail transportation or the loss of records. It is important to note that the IRS does not consider the following reasons to be acceptable excuses for a late submission:

being unable to access the internet, a computer, or a printer

incorrectly filling out the tax form and hesitantly receiving the tax form

3. Raising Late Filing Penalties

The late submission penalty usually raises the amount due. The debt will be decreased, though, if the punishment exceeds 10%. If you owe $100 and must pay a $50 penalty, you will only be accountable for the initial $100 after paying $50.

4. The Amount Due

To calculate the entire sum owed, use the formula below:

The tax is $100.

The charge is $50.

We owe a sum of $150.

If you submit your taxes after the deadline and have a small tax debt—less than $100—or a low taxable income, you might be entitled to a rebate.

5. Verify all of your income tax forms.

Document 1040 is the favored income tax document used by the IRS. You can obtain the document at

Any fees that are required, such as those for filing a report, must be paid. To accomplish this, a direct debit method is usually used.

6. Estimated Tax Payments

By the 15th of every month, you must make estimated tax payments in a sum equal to your tax liability.

Finding Your Penalty Amount

The rule is simple, don’t underpay your taxes, don’t pay the penalty. The penalty amount is calculated by multiplying your underpayment sum by ten. In other terms, you owe $1,000 in taxes and have made a $10 underpayment. An $10.00 charge is due.

The punishment is calculated by ten-folding the underpayment. Consequently, you would have a $250 underpayment if you owed $500 but only made a $250 payment. $25.00, or ten times $250, is the punishment.

How does that work exactly?

As a result, if you underpay, you must pay the fee.

Since we are using that sum to calculate the underpayment, you must double the amount you undervalued by 10. We won’t go over the additional factors that affect the punishment amount at this time.

Consider the scenario where your salary was $200 but your tax debt was $800. You made $1,000 total in revenue and have already paid $800 in taxes. Finding the underpayment’s outcome is as follows: $200 – $800 = -$800.

Your deficit is $800.

This amount must be multiplied by 10 to determine the fee.

– $800 x.10 = – $80.00

You will pay a $80.00 charge.

Imagine that you were underpaid by $90.

$90 – $80 = -$10

Again, the difference is $10.

Add ten to the underpayment to determine the punishment.

– $10 x.10 = – $1.00

You’ll receive a $1 charge.

What percentage of underpayment fines will there be in 2022? The penalty rate for 2022 is 2.5% of what you repay. For a $100 bill, the penalty amount, for instance, is $2.50.

How long will the penalty last?

The deadline for making a penalty payment is three years from the date you first became compelled to pay the tax.

What Can Be Done to Avoid the Underpayment Penalty?

If you request a return, you should plan your payment schedule.

Tips to reduce your underpayment penalty

You might reduce your punishment by paying your taxes ahead of schedule. You can either settle your fine online or with a check. You can avert the penalty by paying all of the revenue you due.

Is the underpayment punishment lifted for 2021?

This deferral does not apply to any income tax returns that must be submitted on or before January 1, 2021, for the 2020 tax year or for a return for a prior year. (2019).

Does the waiver apply to Forms 1040, 1040A, 1040-ES, 1040X, and modified forms filed for prior years?

Yes. There’s no penalty for any income tax return for the taxable year beginning on January 1, 2021. It’s because the government wanted to give some relief to taxpayers.

What about filers who submitted versions 1040, 1040A, 1040EZ, 1040X, or altered versions in 2018 but did not make the required tax payments?

This exemption is not available to all taxpayers. The taxpayers filing a Form 1040, 1040A, 1040EZ, 1040X, or revised return for the 2018 tax year and having a total income of more than $50,000.

Related article, How to Get Tax Benefits from Your Home Loan


The repercussions of paying taxes late are complicated. The different computations and their methods are unfamiliar to a large portion of the financial workforce. In addition, a lot of accountants aren’t conscious that there are different penalties for underpaying anticipated taxes versus real taxes. To correctly submit your tax returns and gain access to many tax benefits for independent contractors or self-employed people, use a one-stop tax store like FlyFin.

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