Legal Question in Tax Law in California

Underpayment Penalty
I am not quite sure what underpayment penalty means by IRS. I did my income tax return for 2005 using one of those tax filing software and found out that I owe $1,400 for the year 2005. I am going to pay this entire amount prior to 04/15/06. Another issue is that I have filed for OIC few years ago and my OIC was accepted by IRS in summer of 2004. IRS said that any credit/return for 2004 tax return was to be kept by them. So they did keep $1,600 of my tax return/credit for the year 2004. I know for the next 5 years, I have to file tax return on time and pay return on time so I am doing that. But what is this underpayment penalty mean? Would this jeoperdize or cancel any of my OIC settlement? I tried to look up publication 2210 on-line but they do not have it for the year 2005 yet. So I read the one from year 2004.I just cannot figure out what they are talking about as to how much they are going to bill me for it etc. etc. Kindly advise.

Asked on 1/18/06, 1:12 am

Donald Field Donald L. Field, Jr., Attorney at Law

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Re: Underpayment Penalty

see: http://www.irs.gov/taxtopics/tc306.html

see also: http://www.irstaxattorney.com/offer-in-compromise/breach_of_agreement.html

Answered on 1/21/06, 2:34 pm

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