Automatic Penalty for Underpayment of Estimated Tax 

In 2005 the Office of Tax and Revenue (OTR) began to automatically charge a penalty for underpayment of estimated tax by any person, financial institution or business. This change took effect January 1, 2005, for tax year 2004 returns.

OTR will charge 10 percent interest, compounded daily, on any underpayment of estimated taxes. In the past, auditors manually added this charge. OTR’s Integrated Tax System (ITS) is now able to find all underpayments of estimated taxes and automatically charge penalties.

To avoid such charges, taxpayers should remember the following instructions when filing District returns and when planning for the coming tax year:

• Instructions for Individuals 
• Instructions for Corporations, Financial Institutions, and Unincorporated Businesses

Persons with questions about estimated tax requirements may call OTR Customer Service at (202) 727-4829.

• Tips for Understanding and Calculating Your Estimated Tax Penalty for Individual Income Tax
• Outline of the Estimated Tax Penalty for Individual Taxpayers