Sunday, August 13, 2017
Wall Street Journal Tax Report, Number of Americans Caught Underpaying Some Taxes Surges 40%:
Attention gig workers, retirees, business owners and investors: Double-check your estimated-tax payments to Uncle Sam.
For reasons that aren’t clear, a growing number of people who pay taxes quarterly are getting their payments wrong and incurring penalties as a result. These taxpayers often owe estimated taxes because they have income that’s not subject to the same withholding as wages earned by employees.
According to Internal Revenue Service data, the number of filers penalized for underpaying estimated taxes rose nearly 40% between 2010 and 2015 — to 10 million from 7.2 million.
The surge in estimated-tax penalties is puzzling experts, even at the IRS. The agency says it hasn’t mounted an enforcement campaign in this area.
Tax preparers suspect several factors are at work. For most of the period penalties grew, the interest rate was 3% — the lowest in decades, making the pain of paying them lower as well.