What typically avoids an underpayment penalty for taxpayers?

The correct choice identifies a situation where taxpayers can avoid an underpayment penalty. Generally, if a taxpayer owes less than $1,000 in tax when their return is filed, they are not subject to underpayment penalties. This threshold is established to provide relief to taxpayers who may have only minor tax liabilities or who underpaid in a lower amount during the tax year.

Taxpayers who owe $1,000 or more may trigger penalties because the IRS expects them to pay a certain amount throughout the year, either through withholding or estimated tax payments. Meeting this threshold helps keep the tax system fair as it ensures that taxpayers are contributing appropriately based on their income levels.

Other options do not align with the requirements to avoid underpayment penalties. For example, filing taxes after the deadline does not inherently prevent underpayment issues, as penalties can still apply based on the amount owed. Paying at least 50% of the current year tax does not meet the IRS’s guidelines to avoid penalties either since the full amount owed needs to be considered. Lastly, filing an extension can delay the filing date but does not change the payment requirements or avoid potential penalties on underpayment of taxes.