The IRS imposes an addition to tax equal to the interest that would accrue on the underpayment for the period of the underpayment. The interest rate on underpayments of tax is the federal short-term rate plus three percentage points.
If you're making more money trading (return-wise), don't pay 'em. Just pay the penalty. Only really bad traders pony up every quarter.
In addition to interest, they automatically hit you with a negligence penalty (I think around 10%) if your underpayment is more than a certain amount (20%?).
Iâm not sure the 20% substantial understatement penalty applies in the context of somebody whose only goof was that the person did not pay their quarterlies. As I recall, the substantial understatement penalty applies only when a return has been filed by the taxpayer, and the amount of tax shown on that return is less than the amount that SHOULD have been shown by 10% or $5k, whichever is greater. I donât have the time to go back and research this now, but in going from memory, I donât think the 20% substantial understatement penalty comes into play if the taxpayer files an accurate, timely return but failed to pay the quarterlies along the way.
jwishcamper, You're right. I did not read the subject closely enough. No penalty that I'm aware of for underpaying estimated taxes. It's just the interest charge.
whatever it is or isnt its too much. dont just hand over your hard earned money you gotta exercise due diligence here if you wanna accumulate wealth. LEARN THE RULES DUH! DONT BREAK THEM! :-/