In 2005 the Office of Tax and Revenue (OTR) began to automatically charge a penalty for underpayment of estimated tax by any person, financial institution or business. This change took effect January 1, 2005, for tax year 2004 returns. OTR will charge 10 percent interest, compounded daily, on any underpayment of estimated taxes. In the past, auditors manually added this charge. OTR’s Integrated Tax System (ITS) is now able to find all underpayments of estimated taxes and automatically charge penalties. To avoid such charges, taxpayers should remember the following instructions when filing District returns and when planning for the coming tax year: Instructions for Individuals
Instructions for Corporations, Financial Institutions, and Unincorporated Businesses
Persons with questions about estimated tax requirements may call OTR Customer Service at (202) 727-4829. Tips for Understanding and Calculating Your Estimated Tax Penalty for Individual Income Tax
Office of Tax and Revenue Outline of the Estimated Tax Penalty for Individual TaxpayersIndividual Income Tax (per DC Code 47-4214 "Underpayment of Estimated Tax by Individuals") The following requirements apply to taxpayers whose withholding does not fully cover their annual tax liability:
Why do I have an underpayment penalty?If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
How do I avoid California estimated tax penalty?If your withholding plus quarterly estimated tax payments equal least 66.67% of your last year's tax liability, you will not be charged an underpayment penalty.
|