Hi,
Based on the withholding on my W2 for 2024, I don't owe any tax on the return. But, when I added in the interests earned from my bank's 1099-INT (from CD), I end up owing $1200 taxes. Does this mean I will have underpayment penalty because I owe more the $1000?
If yes, what do I need to do more for 2024 return?
If yes, what do I need to do for 2025 to avoid this penalty?
You would not owe the underpayment penalty if you paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. (If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%.)
TurboTax automatically calculates if the penalty is owed, and will allow you to apply for an exception (you can go through the interview and TurboTax will determine if you qualify and create the needed forms).
If you owe, TurboTax will ask if you want to do estimated tax payments. You can also provide your employer with a new W4 and request additional withholding if you want to have it deducted from your pay throughout the year.