how to calculate underpayment penalty interest
The rate changes from-year-to-year and from quarter-to-quarter. The interest rate is short-term with a daily compounding interest. Yet, you will not have to pay an underpayment if the amount not paid does not exceed $1,000. A tax underpayment penalty is set by the government and sent to you. It is calculated on what are the current market interest rates. If you wish to calculate it on your own, take a look at last yearâs income tax return. Compare it to this yearâs.