Which of the following applies if a taxpayer's withholding is not sufficient to cover tax liability?

When a taxpayer's withholding is not sufficient to cover their total tax liability for the year, the taxpayer may face penalties. This happens because the Internal Revenue Service (IRS) expects taxpayers to pay their taxes as they earn or receive income, which is generally achieved through withholding or quarterly estimated tax payments.

If the amount withheld is less than what the taxpayer owes, the IRS assesses underpayment penalties, especially if the taxpayer did not pay enough through withholding or estimated tax payments throughout the year. It's important for taxpayers to monitor their withholding and make adjustments if necessary, either by increasing their withholding or making estimated payments, to avoid potential penalties.

In contrast, requesting a refund immediately would not be applicable if withholding was insufficient; a refund typically arises when excess taxes were paid. There is no automatic adjustment to taxable income based on withholding amounts, and if withholding falls short, it does not equate to not owing taxes. Hence, the correct option emphasizes the fiscal responsibility placed on taxpayers regarding their withholding.