What amount does Ray owe for underpayment penalty in 2023?

In evaluating whether Ray owes an underpayment penalty for 2023, it's essential to understand the thresholds and requirements set by the IRS for underpayment penalties. An underpayment penalty typically occurs when you don't pay enough tax throughout the year, either through withholding or estimated payments.

The IRS generally requires individuals to have paid either 90% of the current year's tax liability or 100% of the previous year's tax liability (110% if the previous year's adjusted gross income exceeds a certain threshold). If taxpayers meet these criteria, they can avoid an underpayment penalty.

Given that the correct choice indicates an amount of $0, it suggests that Ray either met the necessary payment thresholds or perhaps had no tax liability for the year. This means that Ray either fully covered his owed taxes through withholdings or estimated payments, thereby exempting himself from penalties.

Understanding the contexts in which someone might owe a penalty is also crucial. If someone significantly underpaid their estimated taxes or withheld too little during the year, they might face penalties. However, the absence of any owing amount solidly indicates compliance with IRS requirements, ensuring Ray doesn’t face any financial penalties related to underpayment.