Definitions for "Underpayment Penalty"
If you did not pay enough tax during the year either through withholding or by making estimated tax payments, you may have to pay a penalty. In certain situations, you will not have to pay the penalty, such as if you had no tax liability in the prior year or if your current-year tax minus withholding is $1,000 or less.
If a taxpayer did not pay enough tax on a timely basis during the year, he or she will have an underpayment of estimated tax, and may, depending on circumstances, be required to pay a penalty. The penalty, if any, is computed on Form 2210.
A penalty for not paying enough total estimated tax and withholding. To avoid underpayment penalties, you can pay a percentage of last year's tax due or of the current year's expected tax due. The taxes may be paid in the form of combined estimated and withholding tax payments.