penalty and refund

[STCT]

for the past 2 years Turbo Tax said I owe a penalty for not having enough tax withheld - and each year the IRS sends the penalty money back in a check saying I made an error - what's going here?  Not a huge amount - about $200 penalty in 2023 and $161 in 2024.  nice to get the money back, but what am I missing?  

[HollyP]

It’s likely that the underpayment penalty that you saw was an estimate and Form 2210 wasn't required with your return. The IRS doesn’t require it’s filing unless you are requesting a wavier, you’re annualizing, you’re treating your withholdings as paid when actually withheld, or your filing state changed from or to Married Filing Jointly between the tax years. Check your tax records to confirm. 
 

The IRS will figure out the penalty for you and send a bill, or in your case, where there's an overpayment, they will refund it. You can read more about who has to pay the penalty and the various exceptions here. The IRS notice should explain why they changed the penalty amount, and what to do if you disagree.  

[VolvoGirl]

Well before you file you should always review your whole return.   See if there is a penalty on 1040 line 38.   If there is you can try to eliminate it.

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

If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form.  If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column.  Type 2210 in the search box and open the 2210 form.  Check box C if you want to let the IRS calculate it.