Ease Underpayment Anxiety with PAYE Discipline

By: Sondang R. Purba, Directorate General of Taxes’ employee

During the annual tax return period last April, two doctors came to tax corner held by a tax office in a hospital. They had a very different approach to handle their income tax returns, which both happen to be underpayment tax returns. Both of them had multiple employers, which meant their income had to be recalculated and often resulted in underpayment. One doctor appeared upset and complained a lot about the amount he had to pay, while the other remained calm. The latter one explained that she had anticipated the situation, so her focus was only on learning to report her income in Coretax for the first time, and not worrying about the payment itself.

“Every time I receive income, I record it and recalculate the tax to ensure how much I actually owe. If I notice that the withheld tax is lower than what I should pay, I set aside some money, so it will cover my underpayment at the end of the fiscal year. It’s simple, actually. Just like having a designated post for paying taxes in my bank account”, she said. 

It’s a sensible act, since we also usually put aside some money to buy things that we need, then why not if we use the same principle in preparing money to pay the tax owed by the end of the fiscal year.

The Unsettling Feelings of  Underpayment Tax Return

Although most educated people understand the importance of taxes, few actually enjoy paying them. The tax return period is often dreaded, as taxes are commonly seen as a burden rather than an obligation. Furthermore, when it comes to underpayment tax returns, the dread feels double to most  taxpayers. Underpayment in a tax return can feel frightening for many people because it means that they still owe money to government by the end of the fiscal year. It feels like an unexpected financial burden, since people often assume that their taxes already covered by their employer.

That discovering they still have to pay some amount make them feel like there is a sudden bill they weren’t prepared for. Instead of the relief of finishing tax season, underpayment creates anxiety. It feels like punishment for working multiple jobs or earning extra income.  It makes the situation even more intimidating when taxpayers worry about fines and interest charges on lateness. There will be additional cash flow stress, because by the time the tax return is filed, the money earned months earlier may already be spent. Having to find extra funds at once can strain household budgets.

Convenience of Payment

We can see that job vacancy announcements often highlight the “net of tax” take-home pay. This gives candidates a clear picture of how much money they will actually bring home. For instance, a net income of 37 million is more appealing than a gross income of 40 million before tax.

Adam Smith in his classic work, The Wealth of Nations, emphasized that one of the fundamental principles of a good tax system is convenience of payment.  When Adam Smith spoke of convenience, he referred to two aspects: timing of payment and method of payment, particularly the administrative process.

Withholding tax is a practical embodiment of this principle. Instead of requiring taxpayers to handle all the reporting and payment themselves, the responsibility is placed on the employer to withhold and pay the taxes. Timing is crucial. Pay As You Earn (PAYE) feel easier because the tax is “taken” while the money is still on hand. 

We all know that it is easier to pay taxes when the taxpayer still has the money in hand. In Indonesia, for example, Income Tax Article 21 requires employers to withhold tax at the time of salary payment. Every month, the company calculates the employee’s tax liability, and by the end of the fiscal year, all income is reconciled to ensure the accuracy.

Pay As You Earn Discipline

That  system works smoothly for employees with only one job. However, in today’s world, side hustles and multiple sources of income are common. These situations increase the likelihood of underpayment when filing tax returns. It often happened because the income from secondary jobs was taxed at lower brackets or because the income came from small enterprises without withholding obligations. In such cases, individuals must report and pay the tax by themselves.  

So, what approaches can be taken to address this issue, by learning from the convenience of payment that Adam smith is referring?  Discipline is the key, particularly the pay as you earn discipline.  Taxpayers should act like employers that withhold the tax when paying their employee by: recording all income, calculate the tax owed on that income, and set aside funds to cover any shortfall.

Just like the calm doctor who prepared ahead, understanding that paying taxes is easier when the money is still available. It  makes the process far less stressful. In short, underpayment is scary because it combines financial surprise, cash flow disruption, and emotional stress. That’s why disciplined habits—like recording income, recalculating taxes regularly, and setting aside money—help reduce the shock and make the tax season more manageable.

Let’s start it now, your underpayment tax filing return experience for 2026 will have a much relaxing vibes!

*)This article represents the personal opinion of the author and does not reflect the official stance of the institution where the author works.

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