Retirement is supposed to simplify your life, but for many new retirees, it’s doing the opposite when tax season rolls around. Instead of a clean break from paychecks and withholding, they’re getting unexpected IRS letters about penalties. The culprit is the IRS underpayment penalty retirees trap, which is a confusing shift from automatic tax withholding to a “pay-as-you-go” system. Many retirees don’t realize they’re supposed to pay taxes throughout the year, not just in April. Here’s why this is happening and how to avoid getting caught in it.
