Hello,
I am sorry to hear you received a CP30 notice for underpayment of estimated taxes. I hope to clarify this for you. To answer your questions:
1. Why did I owe a penalty since my overall tax payments satisfied the required taxes, and I was due a refund? My understanding is that a penalty may be avoided if a taxpayer owes less than $1,000 in tax.
Answer: The estimated tax penalty is not based on whether you had a refund or not. It is based on your tax liability. Self employed contractors who expect to owe more than $1000 in taxes after withholding and refundable credits are subject to estimated payments as there is no withholding from the self employment
2. Who is responsible for the estimated tax penalty - the preparer or the IRS? The estimated tax penalty is calculated on the tax return and appears on line 38 of the 1040.
3. Since my income increased in the 2nd half of the year, should the tax return have included Form 2210 - Schedule A1 - Annualized Income Installment Method computation to avoid the penalty? By choosing to compare the annualized income installment method , only a small portion of your income would be earned at the beginning of the year.
I have included more information on the estimated tax penalty:
https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty
I
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