Example: assume no federal taxes have been withheld during 2018. On
April 15th 2019 tax return is filed and 20k of taxes is owed. No late
payment penalty is assessed because no taxes were owed for 2017. Will
there still be an interest charge on the 20k?
I believe there is a flaw in this logic. As described in the question, the fact that that no taxes were owed for 2017 is not relevant. In order for the rest of the question to be true the key metric is that there was no tax liability for 2017.
from IRS pub 505
Who Does Not Have To Pay Estimated Tax
If you receive salaries and wages, you may be able to avoid paying
estimated tax by asking your employer to take more tax out of your
earnings. To do this, file a new Form W-4 with your employer. See
Estimated tax not required.
You don’t have to pay estimated tax for 2018 if you meet all three of
the following conditions.
- You had no tax liability for 2017.
- You were a U.S. citizen or resident alien for the whole year.
- Your 2017 tax year covered a 12-month period.
You had no tax liability for 2017 if your total tax (defined later
under Total tax for 2017—line 12b ) was zero or you didn’t have to
file an income tax return.
So if you had no tax liability in 2017, then you can avoid estimated payments.
If you have zero withheld in 2018, and owe 20K then expect to be hit with the underpayment penalty.