IRS Doubles Penalty for this Common Mistake

The Internal Revenue Service penalty for tax underpayments has nearly tripled since 2021, putting gig economy workers and consultants at the largest risk of having to cough up big bucks to Uncle Sam.

As of Oct. 1, the IRS will now charge 8% interest on estimated tax underpayments, up from 3% two years ago, according to The Wall Street Journal.

The penalties are largely applied to pay-as-you-go workers who do not have taxes withheld and fail to make estimated quarterly payments before filing their taxes in April.

Workers who do have taxes withheld would still be hit with the new higher penalty if they don’t accurately calculate and pay taxes on any additional income, as would people earning higher-than-expected dividend payments.

Karla Dennis, a La Palma, Calif., enrolled agent, said taxpayers who change their withholding to get more weekly cash could also run into trouble. (Read more from “IRS Doubles Penalty for this Common Mistake” HERE)

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