IRS deducted missed tax prepayment penalty even though I wasn't working in the first quarter

[user17727186999]

Hi, I submitted my 2025 federal tax return through TurboTax. The IRS processed it and deducted a penalty for not making a tax prepayment for the first quarter. I was self employed but not working, nor did I know I was going to be working, until the middle of the year, hence no payment in April. What did I or TurboTax do wrong and how can I recover the penalty? Thanks.

[RobertB4444]

When you enter your income into your tax return both the TurboTax system and the IRS assume that you earned that income equally over the course of the 365 days of the year.  In your case, the income that you earned all in the last three quarters was assumed to have been earned just as equally in the first quarter.  

In order to fix this issue in TurboTax you need to file a form with the IRS that tells them that you earned all the money in the last three quarters.  Otherwise, they have no way to know.  So you need to go to the 'Other Tax Situations' of your federal return.

You have two ways to handle this right now.  You can fill out a form 2210 and submit that along with a letter to the IRS in response to the penalty notice.  Or you can file an amended return which includes the 2210.  (It's not a bad idea to do both).

Either way you need that 2210.  So tell the system that you want to amend your 2025 tax return.  Then go to 'Other Tax Situations'.  Scroll down to 'Additional Tax Payments' and click 'Start' next to 'Underpayment Penalties'.  (If it says you have no underpayment penalties say yes to reviewing the estimated penalty topics.)  Then you will go through and enter your income by quarter to show when you should have made estimated payments and how much they should have been.  Because you had no income in the first quarter the form generated by this should show that you owed no estimate for the first quarter.  Submitting that to the IRS should remove the penalty.

You can e-file the amended return if the system allows you.  It may not because it may not register this change as enough of a change to merit an amended return.  If it doesn't then you can print and mail the amended return in.  

You should also print a copy of the form 2210 which will show your annualized income.  You should mail that printed copy to the return address on the notice that is requesting a penalty payment from you along with a letter requesting abatement of the penalties because of the 2210 amounts.