underpayment penalty

Definition

Penalty assessed by an Internal Revenue Service on a taxpayer for failure to pay a certain percentage of taxes to the government during the year. This is typically a result of a taxpayer claiming too many exemptions during the year, thus decreasing the amount that was deducted from their pay check for tax payments. Taxpayers can avoid this penalty by changing the exemptions claimed on their W-4 form or submitting estimated quarterly payments to the Internal Revenue Service before the end of the year.

Use this term in a sentence

After accidentally claiming too many exemptions, I was assessed an underpayment penalty by the IRS.

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undermentioned underperform