Estimated tax penalty
Hi Terry, I am retired and the withholdings from my pension and investment income were far below my tax obligation resulting in a penalty of $45 which is reflected in my form 1040. I have been told several different ways of paying this amount to the irs. One was to wait for them to send me a bill, I worry about added interest, and another was to file a lengthy form 2210. Or can I just add the $45 to what I send in to pay my tax? Thanks and I enjoy your column.
Terry Says
Here is the answer I just received from the IRS:
If this is the estimated tax penalty (and it sounds like it is), you’re not required to pay it until it’s assessed.
However, the way she describes it, it sounds like she used tax software, and the software, as is often the case, self-assessed the penalty. If so, it presumably included the penalty amount on the estimated tax penalty line (Form 1040, Line 38) and quite possibly generated the 2210.
If she’s not asking to reduce the penalty, based on one of the exceptions, then the $45 penalty amount can be included with whatever she owes. You don’t have to make a separate payment.
If she’s newly retired, it’s possible she qualifies for the penalty waiver, and there’s a way to indicate that on the return (Form 2210, Part II).
