I am self employed, filing jointly with my W2 husband, and received an underpayment penalty of $1071. However, our overall Total Tax number is less than our Total Tax Withheld or Already Paid. Hoping someone can help clarify how this is the case?
I have an idea that the government assumes you make all your income / pay all your quarterly estimated taxes evenly across each quarter of the year. Unfortunately my income varies/fluctuates where I can make much less in the beginning of the year and more in the later part of the year. And so I paid my quarterly estimated taxes based on how much money made in each respective quarter (this makes the most sense to me), as I do not know by year's end how much total income I will have brought in.
If I select the option to "Let the IRS calculate" the penalty - then the underpayment penalty gets moved off the return and I believe I would likely just receive a separate bill in the mail, is that correct? Once received, am I able to rebut the penalty by showing that I paid the rightful amount of tax each quarter for how much income was being made? Again, our Total Tax for the year came out to less than the Total Tax Withheld or Already Paid.
