10 Apr We owe $6,700 in taxes. Will we have to pay penalties?
Q. After doing our taxes this year we discovered that we owe the federal government $6,700. My husband retired in June and I retired the year before, and we did not have any deductions taken from our Social Security. We have since corrected this, but we are wondering if we can expect to be penalized for owing so much and will we get another bill from the government?
A. That’s an ugly surprise.
You might receive a bill for an underpayment penalty depending on the amount of your taxes you owe for 2018.
For 2018, you will be subject to a penalty if you did not pay taxes equal to 80 percent of your 2018 tax, or 100 percent of your 2017 tax – or 110 percent if your 2017 adjusted gross income was more than $150,000, said Gail Rosen, a Martinsville-based certified public accountant.
“The underpayment penalty is calculated on Form 2210 – Underpayment of Estimated Tax by Individuals- and reported on line 23 of Form 1040,” Rosen said. “The IRS interest rate for individuals is based on the federal short-term rate plus 3 percentage points.”
You avoid a penalty if you owe less than $1,000, she said.
To avoid penalties in 2019, evaluate if you need to have withholding taken out of your Social Security or pay quarterly estimates, she said.
The first quarterly estimate would be due on April 15.
Email your questions to moc.p1566153527leHye1566153527noMJN1566153527@ksA1566153527.
This story was originally published on April 10, 2019.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.