Retirement Answer Man The Difference Between an IRS Late Payment Penalty and Interest
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Sep 24, 2025 Join tax expert Erin Coe, an enrolled agent, as she breaks down the maze of IRS penalties and interest that can catch retirees off-guard. Learn the crucial differences between tax penalties and interest accrual, and get tips on calculating estimated payments. Erin shares practical strategies like the use of Form 1040-ES and how withholding can save you from headaches down the line. Plus, hear an inspiring retirement success story from Lottie that emphasizes simplicity in planning for a stress-free retirement!
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From Analysis Paralysis To Simple Clarity
- Lottie froze before retirement chasing the 'perfect' plan and wrote down a reminder to pursue elegant simplicity.
- She retired and found clarity by focusing on living rather than perfection.
Plan Tax Payments Before Retirement
- Do plan for withholding or estimated tax payments when you retire to avoid surprises at tax time.
- Erin Coe says it's better to know a $5,000 bill is coming than be shocked on April 15th.
How Underpayment Penalties Work
- Underpayment penalties arise when you fail to withhold or remit enough estimated tax during the year.
- Safe harbors exist: pay 90% of this year's tax or 100% (110% for high incomes) of last year's tax to avoid the penalty.