The entire process of determining whether you are subject to an underpayment penalty begins with the W-4 form, which can be found in the link below. The underpayment penalty is levied when you’ve paid the government too little in taxes over the year. The tricky part about the latter scenario is that you can’t go overboard with it if you owe the government too much money, you’ll be subject to an underpayment penalty, which punishes you with fees and interest based on the amount you owe.Ĭlick Here to Download the MBA Excel Tax Liability Estimator The Underpayment Penalty
If, on the other hand, I owe the government, then it equates to getting a free loan from the government. If at the end of the year, the government owes me a refund check, it’s the same as giving the US Treasury a free loan on my money. From a financial perspective, my preference is to owe the government a little bit of money. As we get close to the end of the year, one of the things I always make sure to check before January is my overall tax liability.
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