TurboTax has calculated that I owe an ‘underpayment of my estimated taxes’ penalty for 2022. It gives me the option of paying the penalty right now (with my 2022 tax return) or waiting for the IRS to send me a bill in the mail. I am going to pay the tax bill due in full by the April deadline. I am also planning to request a First Time Abate on this underpayment penalty as I have a clean tax compliance record over the past several years.
I have seen commenters mention that you have better odds on succeeding with the FTA request if you don't pay the IRS penalty up front. Is this true, and why is that?
If I were to not pay the penalty immediately and wait for the letter from the IRS, I am concerned that this will subject me to more interest $$ than if I were to have paid right away the amount TurboTax calculated. However, according to TurboTax, once I receive the IRS bill, if I pay the penalty within the time specified on the bill, there will be no interest charged. Is this correct?
So there shouldn’t be a big difference in what I owe in penalty/interest according to TurboTax (calculated today) vs IRS (calculated whenever they get around to it and bill me)? Note: my ‘penalty payment after receiving the bill’ scenario is assuming I was denied by the IRS in my FTA request.
