Underwithholding penalty is essentially interest on the unpaid taxes. Other than the pain of writing a large check to the IRS there are no additional issues.Thank you for your clear explanation. TurboTax reported the penalty was about $25, and I was wondering why it used the "about" terminology, rather than giving a specific number.The consequence that most concerns me is that the IRS might decide to compel me to have dividend-payers withhold taxes on dividends payable. My investing strategy incorporates reinvesting dividends, so that consequence would be inconvenient. Do I need to worry about this consequence?In my particular case, I converted a Traditional IRA to a Roth IRA in 1998. I elected to spread the taxable amount over FOUR years (which was an option in 1998); however I got it into my head that I spread the taxable amount over THREE years. When I calculated my withholding requirements for Tax Year 2001, I neglected to include the income resulting from the final year of the IRA conversion. It wasn't malice. It was just inattention to detail. If necessary, I'd like to be able to argue that my underwithholding was due to my misunderstanding of how to handle a situation that no longer exists and therefore withholding federal income taxes on dividends payable is inappropriate.David Jacobs
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra