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Is There A Penalty For Not Paying Enough Estimated Tax?
Yes. If you did not pay enough estimated tax or have enough tax withheld from your earnings by any due date for paying estimated tax, you may be subject to a penalty. From January 1, 2004 through June 30, 2004, the underpayment penalty is 6%, compounded monthly. From July 1, 2004 through December 31, 2004, the underpayment penalty is 7%, compounded monthly. For calendar year 2005, the penalty is 8%, compounded monthly. If your 2004 tax liability is $1,000 or more, you should refer to Form 2210ME, Underpayment of Estimated Tax by Individuals.
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