DR 0204 Tax Year Ending Computation of Penalty Due Based on Underpayment of Colorado Individual Esti-2025

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Nobody wants to get hit with an underpayment penalty when they file their tax return. There are three key ways you can avoid this: 1. Pay 100% of your prior year tax. 2. Annualize your income. 3. Pay money with your tax extension.
Taxpayers with California adjusted gross income (AGI) equal to or greater than $1,000,000 (or $500,000 if married/RDP filing separately) must use the tax on their 2022 tax return to figure their penalty if they are subject to the underpayment of estimated tax penalty.
The income tax penalty for late filing or payment is the greater of $5 or a percentage of the unpaid tax equal to 5% plus % for each full or partial month the tax remains unpaid, not to exceed a total of 12%.
If you didnt pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
If you do not file your income tax return or make your payment on time, the Colorado DOR will assess a penalty of 5.5% of the tax due each month or partial month, up to a total of 12%. If you owe less than $100, your penalty is $5 per month. For example, if you owe $1,000, the penalty for the first month will be $55.

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The penalty will be the appropriate Colorado income tax interest rate multiplied by the amount of the underpayment for each quarter multiplied by the underpayment period.
The underpayment penalty is calculated by multiplying how much tax you owed for each quarter by the interest rate for that quarter. This quarter (January through March), the underpayment penalty interest rate is 7%. This is down 1 percentage point from last quarter.

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