"IRS Underpayment Penalty Skyrockets to 8% in Just 2 Years"
The Internal Revenue Service (IRS) has increased the penalty for tax underpayments to 8%, nearly triple what it was two years ago. This change puts gig economy workers and consultants at a higher risk of facing significant penalties. The penalty primarily affects pay-as-you-go workers who do not have taxes withheld and fail to make estimated quarterly payments. Even workers who have taxes withheld may still be subject to the higher penalty if they fail to accurately calculate and pay taxes on additional income. The increased penalty comes after the IRS collected $1.8 billion in underpayment penalties from 12.2 million Americans in fiscal year 2022. To avoid fines, taxpayers should pay at least 90% of their tax bill before filing or have a difference of less than $1,000.