Underpayment Penalty

Posted in Finance, Accounting and Economics Terms, Total Reads: 1585

Definition: Underpayment Penalty

Everyone has to pay taxes. Taxes are calculated as per the underlying rules and slabs. As per the earnings and taxable income, an amount of Income Tax is calculated. Now Underpayment penalty is a tax penalty which comes into picture when an individual pays less than the calculated amount i.e. he/she has underpaid the tax.

During calculation of the amount of tax that one owes, after subtracting however much has been withheld or paid in estimated tax throughout the year, if one has not paid enough tax, a penalty for underpayment is levied.

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