What consequences might arise from failing to make estimated tax payments?

Failing to make estimated tax payments can lead to underpayment penalties imposed by the IRS. Estimated tax payments are required for taxpayers who expect to owe a certain amount in taxes for the year and have insufficient withholding from other income sources. If these payments are not made on time or are underpaid, the IRS may assess a penalty based on the amount of the underpayment.

This penalty is calculated differently than typical tax liabilities and can add an unexpected cost to the taxpayer's burden. The underpayment penalty is designed to encourage taxpayers to pay their tax liability as they earn income throughout the year rather than waiting until tax filing season when a lump sum payment is required.

While other consequences like losing tax refunds or being audited could be relevant to tax filing and payments, the most direct and specific consequence related to failing to make estimated tax payments is indeed the risk of incurring underpayment penalties.