IRS Raises Penalty for Tax Underpayments to 8%

The IRS has increased the interest penalty on estimated tax underpayments to 8%, up from 3% two years ago, potentially impacting self-employed workers and independent contractors who fail to pay the amount the IRS believes they owe. Taxpayers who don't have at least 90% of their taxes withheld during regular pay periods are required to make estimated tax payments at least once each quarter. However, taxpayers who are W-2 employees and have tax payments withheld from each paycheck are not affected by these changes. It is advised for individuals to review their tax situation and make estimated payments to avoid underpayment penalties.