I have used Turbotax to do my taxes for many years. I just received a penalty letter from the IRS for underpayment of estimated taxes on my 2020 return. I owed almost $9,000 when I filed my return for 2020, and I paid that when I filed my return. I filed jointly with my wife in 2019, but we divorced and I filed single in 2020.
When I filed my 2020 return, I allowed the IRS to figure any penalty. I entered our entire joint tax for 2019 for Line 8 of Form 2210 instead of my share of the tax. I did that because it would have been messy and time consuming to figure my share, since I would have to calculate what my tax and my wife's tax would have been in 2019 had we both filed single. I felt that I might not owe a penalty anyway, because 80% of my income that year came from my sale of part of an ownership interest in an S-corp that occurred at the end of August. I hadn't planned to sell that interest until early August, so it wasn't factored into my earlier estimated tax payments. I did factor it into my estimated tax payments in September 2020 and January 2021, but still came up about $9,000 short. The penalty is over $1,200, which seems high based on the relatively small amount of the underpayment compared to the amount of taxes that I paid.
I figured that it was conservative to use our entire tax from 2019 on Form 2210 and that if it turned out that the IRS felt I owed a penalty, I would figure my share of the 2019 tax at that point. Well, I am at that point now, and my real question is how to divide our non-wage income so that I can determine my share of the tax in 2019.
First, I live in Colorado, which is not a community property state. I had income from a job in 2019, and my wife didn't work. I am assuming that all of that wage income is attributable to me, but that only accounts for about 14% of our income. The sale of the company stock, which was in my name, accounts for 80%. The other 6% came from interest and dividends from bank and investment accounts, most of which were in my name. If we lived in a community property state, it is my understanding that all of that non-wage or unearned income would be attributed 50-50 to me and my wife for the purposes of Form 2210. But I am not sure how that works in a non-community property state. If all of the income from assets that are in my name are attributable to me, then I will owe the penalty because that will account for virtually all of our income in 2019. But if the unearned income can be split 50-50 between me and my wife regardless of whose name it is in, then I can avoid most if not all of the penalty.
Any help with this question would be appreciated.
