The penalty for tax overpayment is very small: There is no fine or charge from the IRS. The only loss or charge will be the interest that you could have earned by leaving the tax overpayment in your bank account rather than the government's.

Lending Money

If you make a tax overpayment, you are in effect lending money to the government. It goes from your bank account to the government's bank account until it is tax refund time, when they return it to you.

No Interest

A tax overpayment will be returned to you when you file a full tax return. However, between the time of the payment and that tax return, the government gets to use the money and you do not. They pay you a low rate of interest when they return the overpayment to you.

Cost

The cost of that tax overpayment is the interest you could have made by having that money in your bank or savings account rather than lending it to the government for a low interest.

Fine or Penalty

There is no fine or penalty for tax overpayments; it allows the government to use the money without having to borrow money on which they have to pay a higher interest rate.

Considerations

Overpaying is not a good idea unless you like to get a check back from Uncle Sam once a year. Some people overpay taxes as a form of savings, but it would be better to put the money in your bank account and earn the higher interest rates available there.

Source:

IRS regulations on interest on tax overpayments

Resource:

IRS