Your underpayment penalty is on your 2024 return, not your 2023 return. However, you use your 2023 liability to help determine whether you have a penalty for 2024.
The Tax Code requires us to pay our tax throughout the year, and if we don't make our minimum annual payment through withholding and/or estimated tax payments then we may incur a penalty.
The penalty can be avoided if we pay at least the smaller of:
- 90% of the current year tax liability or
- 100% of the prior year tax liability (or 110% if our income was $150,000 or more)
TurboTax asks about your 2023 liability to try to reduce or eliminate your penalty on this year's return.
