Underpayment penalty- how is it calculated

11 replies
298 views

Hi,

I see that Turbo tax has calculated an underpayment penalty of 29 for me for 2025 for my state return. But i cant see how it was calculated. I had paid an advance tax when i got a lump sum payment during the year. Infact, Turbo tax shows me a state refund after the tax calculation. How would i have underpaid if i see a refund and how can i get rid of this underpayment?

Thanks,

Mike9241

Level 15

Name the state, so further help can be provided specific to that state

The default for most states is that 1/4 of the required tax payments for the year must be made each period. Withholding is assumed to occur evenly throughout the year. Estimates only count in the period when made.

Thus, with uneven payments, the annualized income installment method must be used if the state allows that method or whatever alternative they offer.

hence, it's possible to owe a penalty even when getting a refund.

Mike9241

goyal_rajAuthor

Level 5

Thanks.

The state is North Carolina.

I get a nearly fixed salary every month and tax is withheld from it every month, so I am not sure where the underpayment comes from.

How can I see the calculation in Turbo tax (is there a form/calculation sheet) and how can i amend/remove it if it does not make sense?

Vanessa A

Alumni - Intuit

Are you using the online or desktop version? If you are using the desktop version, you can just switch to forms mode to look for form D422 which is the underpayment penalty worksheet for North Carolina. If you are using the online version, you can go to the print center and then select all forms and you should be able to see your form D-422. You can also find the underpayment penalty and interest screen by walking through the state interview questions. Here you should be able to edit the numbers. Be sure that if you are editing the numbers that you are correct in editing them.

Another way you can see this is by going to the start of the state interview. There should be a screen that tells you your taxable income, tax withheld and tax liability. If this does not look correct, you can go back to the federal income section and select Income>>Wages>>W-2 and double check the entries in your W-2 box 15-17. Be sure that you have commas and periods in the correct spot as well as making sure the numbers are correct.

The only place you can change your taxes withheld is in the W-2 section.

If the numbers are correct and you simply did not have enough withheld, you would need to make changes with your employer and how much they are withholding. The tax rate for 2025 was 4.25%.

North Carolina State Income Tax in 2025: A Guide

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