Will we be fined by the IRS for underpayment?

We underpaid last year by about $500 to the IRS. This year we upped the withholding but will still probably fall about $150 short and have to pay that in. I thought we upped it enough but we unexpectedly made 20% more than last year. Will the IRS charge us for underpaying two years in a row?

So let me get this straight you under paid during the year right? When you did you taxes you owned 500 right? If you paid that then you would have no problem. You can choose for the government to not with hold anything and actually invest your money during the year that would have normally been withheld. At the end of the year just pay what you owe and keep the interest! But I wouldn't reccomend that unless you are A++ with your finances.

If you don't pay them they will tac on interest and expect payment!

No problem. Each year stands on its own, and as long as you are within $1000 you won't be penalized - and there are even some exceptions where that wouldn't bring on a penalty.

There will be no penalty if you pay what you owe when you file your return. Late payment penalty will be added if you don't.

A nominal underpayment is not a big deal. Official IRS policy is to encourage you to have withholding that will generate a refund or balance due of less than $1,000. You appear to be right in the zone.

It doesn't appear that the difference will be enough to trigger and underpayment penalty. If you had as much withheld as your last years taxes then there definitely will be no penalty.

No, because the penalty does not apply if any of the following are true:
a. Your withholdings come to within $1000 of your total tax.
b. The total of your payments and withholdings come to at least 90% of your total tax and all payments are on time.
c. The total of your payments and withholdings come to at least 100% of your total tax for the previous year and all payments are on time.

You pay a penalty when you pay more than $1,000. You will be fine.