I’ve yet to meet someone who likes paying more to the IRS than they are required to. The below article from the WSJ highlights a common IRS penalty that you want to make sure you are avoiding, penalties on under payments.
You can click on the article below to read it all, but for the quick version here are two take-aways for me:
- Getting it wrong and facing under withholding penalties are magnified because interest rates are so much higher these days.
- Withholding from IRA distributions treats those payments as being made throughout the year, even if the payment comes out in Q4. This can be helpful if you realize later in the year you have been under withholding and the client will therefore be hit on underpayment for Q1/Q2.
PS. Avoiding under payment penalties is one of the quick things we can look for when running a tax projection each year!
