We got a CP30 letter from the IRS in the mail stating we owe a penalty for not paying estimated taxes. Our taxes are withheld through our employers

[clough-casey]

We do not pay estimated taxes and never have. I recieved a small inheritance from my mother in 2024, which caused us to owe $11K in taxes which we paid prior to the April 15, 2025 deadline.

[Bsch4477]

Tax has to be paid quarterly. If you had a large amount of income earlier in the year that you didn’t pay estimated tax for that would explain the penalty. I assume that the inheritance that was taxed was something like an inherited IRA withdrawal since inheritance is generally not taxed. 

[baldietax]

For 2024, to avoid penalty you need to pay during the year, thru withholding or timely (usually quarterly) estimated taxes (ES), the smaller of either: 100% of your 2023 tax (110% if AGI > 150k) or 90% of your 2024 tax, this is your 'safe harbor' amount.

If the additional income increased your safe harbor amount such that the withholding you usually make was insufficient to meet it, then you needed to have paid ES for that difference.  And the ES needs to either be paid quarterly, by default the IRS assumes your income is earned evenly thru the year, withholding is assumed to be paid evenly also, but ES need to be paid quarterly to be considered 'timely'.  Even if you pay the balance when you file, the penalty is assessed quarterly and you need to 'pay as you go' to at least meet your safe harbor amount prior to filing.

Alternatively, you can make a one-off ES payment for one-off income and file Form 2210 'annualized income' method to show how the ES payment lined up with uneven income, this is particularly useful for unplanned income events later in the year e.g. Roth conversions - and may fit your situation.

That said, when you prepared your return, TT should have calculated a penalty and given you the opportunity to adopt the annualized income method to minimize that penalty (Other Tax Situations / Underpayment Penalty).  If you are on TT desktop you can double-click in Forms mode on Form 1040 line 38 and again on the worksheet to bring up the Form 2210 calculations.

So if you paid what TT prepared on Form 1040 which includes the penalty, but IRS came back with a penalty notice that could mean some information is different between the IRS and what was input into TT, as the IRS independently calculates it based on data in their systems.  If you didn't have the correct 2023 AGI/Tax information in TT when you prepared 2024 then TT may have assessed no penalty was due based on a lower safe harbor amount than the amount determined by the IRS.

I would start by determining yourself whether or not a penalty was due (see Form 2210 lines 1-9) based, and if so why TT didn't calculate one.

At a minimum you may be able to adopt the annualized income method to reduce the penalty (I'm not sure the process for doing this after filing - see if the CP30 has guidance or others may weigh in here).

More info on ES https://www.irs.gov/faqs/estimated-tax

More info on Form 2210 https://www.irs.gov/pub/irs-pdf/i2210.pdf

Not a CPA just a few thoughts based on what you described, hope this helps.

[rjs]

What the IRS is saying is that you did not have enough tax withheld from your pay, so you should have paid estimated tax in addition to the withholding.

You can use the Tax Withholding Estimator on the IRS web site to figure out what you should each put on the W-4 forms that you give to your employers so that you have enough tax withheld, and don't have to pay estimated tax. But it's too late to do anything about 2024.

How did a "small inheritance" cause you to owe $11,000? As Bsch4477 said, an inheritance is normally not taxable, and you do not even enter it in your tax return. And a "small" amount of additional income of any kind would not result in $11,000 of additional tax. How much did you inherit? Did you just get a check or a direct deposit to your bank account for the inheritance, or was it a financial account of some kind that was transferred to your name? Did you get some kind of 1099-series form, such as 1099-R, or other tax form for the inheritance? If you did not get any tax form, how did you enter the inheritance in your tax return? What form and line number does the inheritance appear on in your tax return?