TurboTax Incorrectly Computed that I Had a Penalty

[scottsh115]

I successfully filed my 2024 taxes using the desktop version of TurboTax. TurboTax calculated that I owed a $157 penalty. When the IRS processed my return, they said I miscalculated and did not owe a penalty. They are sending me a $157 refund check. I did not lose any money, but feel I should report that TurboTax miscalculated my return.

[VolvoGirl · Accepted solution]

No it's not a problem.  Turbo Tax only estimates the penalty.  They don't know what the actual penalty should be.  It's very common for the IRS to reduce it or send you a bill for more.  Or you could go though Form 2210 to try to reduce or eliminate it.  You can even select to let the IRS figure it for you.  

[scottsh115]

Thank you for replying. The IRS caught the error and corrected it. I just thought it was weird that TurboTax computed a penalty. None of the documents that TurboTax dumps (even when all calculation sheets are specified) included Form 2210, which is the one for calculating a penalty. The $157 just showed up on Line 38. Very strange.

[ca2012]

I too had a penalty added to my 2024 return that the IRS just refunded as an unnecessary payment.  Nothing in Turbo Tax explains why or how the figure was computed.  

[scottsh115]

I know. No way to tell. My only guess was that I had stock gains in Q1 but sent in estimated payment in Q4. I reported it as a bug, but others feel what TurboTax does is normal. 

[eladia59]

Same thing happened to me this year.  TT said I owed a late penalty, but the IRS stated I miscalculated and returned the  penalty payment.  Been using TT for over 15 years, this is the first time this has happened.   

[scottsh115]

I have also been using TurboTax for decades, with stock sales, and this is the first time the program has done this. Turbox Tax staff think what it does now is normal.

[jh6u]

Same problem here. How to adjust this so that Turbotax will have recorded the refund? I don't see an option to adjust the penalty.

[VolvoGirl]

@jh6u  Did the IRS adjust the penalty on 1040 line 38?   You don’t need to adjust your filed return for that or record the refund.   It doesn’t need to transfer that to next year.  

[ca2012]

I received the letter saying I over paid and then a couple days later received a check for the entire penalty shown on my return.  Not sure what I’ll need to do for TT next year.  I supposed it was viewed as a return of penalty though and not an adjustment to my tax liability/paid.  

[VolvoGirl]

Right.  Nothing you need to do for next year.    If Turbo Tax gives you a penalty next year  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.

How to add form 2210 for Underpayment Penalty
https://ttlc.intuit.com/community/tax-payments/help/how-do-i-add-form-2210/00/25703

It's under

Federal tab or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[Mike9241]

it is not an adjustment to your tax liability. so for purposes of avoiding an underpayment penalty you ignore the refund and look at your tax liability excluding the penalty. 

there have been many threads about the IRS and Turbotax computing different amounts for the underpayment penalties - even 100% differences - and I don't think anyone knows why this is occurring.  If I had to guess at one possibility it would be that at least some of these taxpayers qualified for natural disaster relief and could pay their estimates later than normal but Turbotax doesn't know or programmed this.  

[scottsh115]

Thank you for replying. Inaccuracies (penalty vs no penalty) aside, Turbo Tax users (including me) are perplexed when the program says a penalty is due, but there is no way to find out why or how it was calculated.

[Mike9241 · Accepted solution]

I use desktop which also doesn't allow viewing the calculation but i found a way that may work if you are using online

1)Open the return. 

2)Go to the tab Other Tax Situations. Then down to Additional Tax payments. Then to the Under Penalty Payment line and select Start or Update 

3)Continue until you reach the "Penalty Waiver" page and select yes

4)Continue to the "Request Waiver" page and select yes

5)Continue to the "Reduce Penalty" page and select Waive Part

6)Continue and for the amount waive you center a small amount like $10. for the explanation a single letter will work - continue and check "done with Penalties"

7) Now select File  > Print or Preview (print if you what to either print it out or save it as a PDF)

😎 select Form and supporting statements under specific forms

9) in the forms list select only the Form 2210 penalty worksheet

10) click on print or preview depending on what you selected in 7

you should now see the Turbotax calculation worksheet

this worked in desktop. don't know about online