🔸 What Is the Underpayment of Estimated Tax Penalty?

This penalty happens when you don’t pay enough taxes throughout the year — either through withholding or estimated tax payments.

Even if you pay everything at tax time, you may still be penalized if you didn’t pay enough during the year.

🔸 Why It Happens?
You may owe this penalty if:

• You owed more than $1,000 when you filed
• Your withholding was too low
• You didn’t make quarterly estimated tax payments
• You had self-employment income, side-gig income, or investments with no taxes withheld

🔸 How to Avoid It Next Year?

• Increase your W-2 withholding
• Make quarterly estimated tax payments
• Pay at least 90% of this year’s tax or 100% of last year’s tax (whichever is lower) to avoid penalties