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Level 4
posted Mar 22, 2019 9:07:56 AM

Why do I have an estimated tax underpayment penalty?

Last year, TurboTax said we should pay estimated quarterly taxes.  It calculated the amount.  We paid the 4 payments on time. 

 

However, this year, after entering the amount we paid in 2018, we are getting an "Underpayment penalty". 

 

Is this trying to say we didn't pay the amount that TurboTax said we should pay?  Because we DID pay that. 

 

OR, does it mean that even with the estimated tax payments, we didn't pay enough to cover our tax liability (which we didn't since we still own some more money)?

0 1 780
1 Replies
Level 1
Mar 22, 2019 1:39:05 PM

Most likely it is because the estimated tax payments you made were insufficient to cover this year's tax liability.

 

The IRS generally assesses a penalty if more than $1000 is owed after prepayments and withholding are applied to the current year's tax bill.  In other words - if you owe more than $1000 this year, the underpayment penalty was assessed because the estimated payments were not enough to cover your tax liability for this year.