Managing and paying taxes is essential, every individual and every company needs to do it! So it’s completely understandable why there might be a problem if someone were to ignore such an important act. Underpaying or completely ignoring taxes is never a good idea, no matter if done on purpose or by accident, everyone should take care of their duties as a citizen or business owner! It’s important to spread awareness about the importance of paying taxes and expats taxes fully and on time, as well as the inevitable consequences of not doing so! Here’s why people get tax underpayment penalties and how to avoid them!
What does it mean?
In order to prevent this from happening to you, you need to fully understand what it means. Receiving this kind of penalty means that an individual paid less than their estimated tax amount. When someone does this, they are usually punished by receiving underpayment penalties depending on the severity of the situation. This could happen for various reasons, but these types of rules are meant to prevent people from abusing the system so everyone should stick by them! The important thing that underpayers need to do is quickly find a solution and start resolving the problem until it turns into something bigger!
What falls under these penalties?
Depending on the situation, in most cases, the person in question needs to pay all of their taxes from the year prior, or at least 90% of taxes from the current year. Obviously, this means adding the withholding taxes with the estimated ones. This penalty is received when someone underpays their estimated amount by irregularly paying or paying the wrong amount. Also, it all depends on how much time went by, with each month that the payments aren’t made the penalty is approximately 0,5 percent of the amount, so someone who missed only one month won’t be in such a bad position as someone who’s withholding the payments for months, or even years!
How to prevent this from happening
Paying taxes is never fun, a lot of stress and energy goes into it, but it’s simply something every citizen needs to do. So the best way to avoid getting into trouble is to pay the full amount of taxes and do it on time and to consistently do this. This can be done by being better at managing your finances and keeping track of your taxes – also knowing the right dates so you can start the tax preparation on time! It’s always a hassle to do things last minute, especially something as important as this! There are so many methods and smart ways to do this, but if all else fails try to pay as much as you can and do it in time, as it will surely be better than paying nothing at all!
Not every situation is the same
Obviously, it all depends on the situation, not all tax under players are getting the same treatment, sometimes a penalty might get dismissed! In special cases such as paying at least 90% of the taxes, missing the tax dates because of a casualty or disaster, also if a person becomes disabled during the tax year it can completely change how things work for the individual due to their new status. There are so many different scenarios that can influence the penalty, but that doesn’t mean you should rely on those chances – always pay things on time and in full!
Other special cases
There are obviously countless instances, but you can’t get away without a penalty every time, but there are more exceptions than you think! For instance, when you change your marital status this can influence if you get a reduced penalty or not. A sudden change of income, like if you get married and thus joining your taxes with your partner you might get a reduced penalty. It also depends on the time of the year, if you started gaining more income in the middle of the year, or later in the year! So each instance is looked at individually, if there is a specific reason why someone was underpaying their taxes there are ways to reduce it! Regardless, you should always strive to pay your taxes, but sometimes you just can’t help it, but at least you’ll know for future times!
At the end of the day, each individual is responsible for keeping track of their taxes and estimating how much the tax will cost at the end – being able to balance paying the fees on time and also paying the full amount can save you a lot of trouble in the long run! So act smart today so you don’t have to worry tomorrow!