Reply to Under withholding- anyone else have this problem?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.[/quote]

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses. [/quote]

The joke is on you - this is hardly “tiny”:

The IRS imposes an underpayment penalty if you do not pay enough tax through withholding or estimated payments, usually totaling less than 90% of the current year's liability or[b] 100% of the prior year's tax. [/b]The penalty is calculated based on the amount of underpayment, the period of underpayment, and the quarterly interest rate (7% for 2025).

Key Penalties and Rates

Underpayment Penalty: Calculated using interest on the underpaid amount, typically 0.5% of the unpaid taxes per month, up to a maximum of 25%.
Failure to Pay Penalty: If you fail to pay the tax shown on your return by the deadline, a 0.5% penalty applies per month, or 0.25% if an installment agreement is in place.
Interest: Interest accrues on unpaid tax from the due date until paid in full (federal short-term rate + 3%).
Accuracy-Related Penalty: A 20% penalty may apply to the portion of the underpayment due to negligence or disregard of rules. 
[/quote]

FYI, above a certain income threshold which I imagine most of DCUM meets, it's 110%.

I calculate 110% of last year's tax and check my paystub to make sure my withholding hits 25% of that each quarter. If I'm under, I make an estimated payment to the IRS and my state. [/quote]

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