In 2023 TTax said I owed a $243 penalty. I filed in late Feb and paid it. Got a U.S. Treasury check back for $243. Anyone else have this issue? How do we get TT to fix?

[County_Mayo]

I made 4 quarterly estimated tax payments during the year, but underpaid by a few thousand. I filed in late Feb paying both what I owed and the penalty TT said I owed ($243). In April, I got a check back from the U.S. Treasury for $243 - the exact penalty amount. That infers I did not have the penalty that TT said I had. Seems to me as long as you make 4 quarterly payments, and file and pay what you owe prior to April 15th, you are good to go. Can anyone ask a TT rep if that is the case? Thanks!

[MindyB]

No, you are not automatically exempt from underpayment penalty if you make quarterly payments and pay by the due date.

However, there are some exceptions to the underpayment penalty. ‌It's likely that you met an exception and that is why you were refunded.

Some exceptions to the penalty for the 2023 tax year were:

• $0 tax liability in 2022
• You paid 90% of your 2023 tax liability

It is possible that you met one of these exceptions.  To review this before filing for next time, go to: Other Tax Situations ;  Underpayment penalties and choose start or edit. You need to page through this section and answer all the questions.  There will be a page for the prior year tax liability that needs to be input.

If that is not the answer to your question, you can get a transcript of your tax return from the IRS that includes would show a penalty due, if they calculated one.  You can do so by filing the instructions here: Transcript types for individuals and ways to order them

[County_Mayo]

Hi Mindy,

Thanks for your reply. With respect to exceptions,  I am not exactly sure what you mean by "$0 tax liability in 2022". I paid a lot of taxes in 2022 ... but perhaps by "liability" you meant what I may have owed when I filed had my estimated tax payments not been enough to 100% cover the total FY22 tax owed? I actually got a small refund in FY22

The 90% number is helpful. Does that mean that in most cases as long as I pay 90% of what is owed there will be no penalty? I badly underestimated my taxes in FY2 (forgot about a couple stock sales right at the end of the year). I just checked, and my estimated payments were only 71% of what I owed when I filed.

In the case we have been talking about (FY23), the penalty I was assessed seemed rational given my significant underpayment during the year, so I just paid it. In fact, I thought the penalty was fairly light given how badly I underpaid my estimated taxes during the year. Regardless, the IRS refunded the exact amount of the penalty payment.

That said, some years back I was assessed a penalty that did not seem anywhere near appropriate: the penalty was actually larger than what I owed (?).

I know it's difficult for you to comment given you are not looking at my actual returns, but I do hope that your engineers will review the TT penalty algorithm  to make sure makes sense relative to IRS guidelines. With the return of my penalty payment last year, it appears - at least from the standpoint of the IRS - I actually did not owe a penalty at all. A pleasant surprise, of course, but it did remind me of the year TT assessed me a penalty that I could not understand at all. That year, I even went through the calculations by hand and could not come anywhere close to what TT reported I owed. But, I was in a hurry to file and just paid it. I did not get a IRS refund of the penalty that year ... but I am not sure that means I can deduce that I actually owed it.

Regardless, thanks for your help and if you can touch base with the "penalty engineers" to double check the algorithm used, I - and perhaps others - would really appreciate it. Thanks!

Best regards,

Mike

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[VolvoGirl]

Hi @County_Mayo   When you filed and paid did you just pay the tax due on your return or did you also pay the penalty separate?  The penalty was already included in the tax due or reduced a refund.  If you notice on 1040 line 38 it is an Estimated tax penalty.  The IRS can refigure it and send you a refund or a bill for more.

If you get a penalty on 1040 line 38, you might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[County_Mayo]

Hi VolvoGirl,

Great question! As soon as I read your msg I thought, that is what you did bozo ... you mistakenly must have added the penalty to the  "Amount You Owe" on line 37. However, I just checked and, nope, I paid exactly the amount on Line 37 and nothing more.

Good try though ... you should get a new badge or something 😉

And thanks for the additional advice ... it may come in handy this year, who knows?

Best regards,

County_Mayo (my new user name)