09/29/2026
Today's Topic: WHY DOES THE IRS STILL PENALIZE YOU EVEN IF YOU PAY IN FULL WHEN FILING? 🚨
Hi everyone. As the personal tax filing deadline approaches (for the October 15th extension), Hoa has received a lot of the same questions about one specific issue. I wanted to share this here to clear up the confusion around Tax Penalties.
Many people tend to think:
❌ "As long as I file and pay my taxes on time by April 15th, I'll never get a penalty."
❌ "I'll just withhold as little tax as possible during the year and pay it all in one lump sum when I file."
These are very common mistakes!
The IRS operates on a "pay-as-you-go" system (you pay tax as you earn or receive income). Basically, there are 3 main types of penalties we often encounter:
1️⃣ Late filing: Filing your tax return late.
2️⃣ Late payment: Paying your tax bill late.
3️⃣ Underpayment of estimated tax: Not paying enough tax during the year.
A lot of people file on time and pay their April tax bill in full but still get penalized. The reason is that they are falling into the 3rd category: Underpayment.
👉 What does Underpayment mean?
According to IRS rules, you must pay at least 90% of your current year's tax liability through payroll deductions (W-2 withholding) or estimated tax payments throughout the year.
For example: Your total tax liability for the year is $20,000, but your W-2 only withheld $10,000. This means you are short $10,000 compared to your actual tax liability. If you wait until April of the following year to pay that $10,000 all at once, you will definitely get hit with an underpayment penalty by the IRS because you didn't pay enough during the actual tax year.
📑 Where is this penalty on your tax return?
This penalty shows up on Line 38, Page 2 of Form 1040. Many people, and even some inexperienced tax preparers, often overlook this number because it's tucked away at the very bottom of the page and isn't in the main data column on the right. If you owed taxes when you filed last year, open up page 2 right now to see if you got hit with this penalty!
💡 How can you avoid the Underpayment Penalty for next year?
The best solution is Tax Planning, especially during the last 3 months of the year. Reviewing your tax situation right now will help you understand where you stand, catch up, and make supplemental payments for any shortfalls before the year ends.
If you have questions, need advice, or want professional Tax Planning and Filing, please contact Harmony Tax and Financial Service at ☎️ (657) 527-9677. Hoa would be more than happy to help you out!
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