How to Calculate 2006 IRS Penalty for Underpayment

Calculating Penalties

The Internal Revenue Service imposes penalties if a taxpayer underpays on his taxes. If a taxpayer needs to file for underpayment penalties, the taxpayer should fill out IRS Form 2210. The numbers calculated on IRS Form 2210 transfer to an individual's tax form, usually IRS Form 1040 or Form 1040-EZ. To avoid penalties, taxpayers should file their taxes on time and pay the appropriate amounts.

Instructions

1. Determine your total underpayment for the year. The IRS provides a worksheet to determine the amount of underpayment on Form 2210.

2. Multiply your total underpayment by 0.05258. For example, a $1,000 underpayment times 0.05258 equals $52.58.

3. Multiply the total underpayment by the number of days before April 15, 2007 you paid any tax for the year and by 0.00022. So if you paid a $1,000 underpayment on April 1, 2007, the equation is ($1,000)(15 days)(0.00022), which equals $3.30. If paying after April 15, 2007, no calculation is needed.

4. Subtract the number from Step 2 from the number calculated in Step 3 if you paid any underpayment before April 15, 2007. For example, $52.58 - $3.30 equals a tax penalty of $49.28. If you did not pay before April 15, 2007, then subtract zero from the number calculated in Step 2. For example, $52.58 - 0 equals a $52.58 tax penalty.

References

• Uncle Fed: IRS 2006 Form 2210 (PDF)