The short answer is that the IRS views taxes as a "pay-as-you-go" system, not a "pay-at-the-end" system.
Even though you are getting a refund now, the IRS calculates penalties based on when the money reached them during the year.
You made a $3,000 payment on December 29th. While that was a great move to ensure you got a refund, the IRS considers that payment to be part of the 4th Quarter only.
The IRS divides the year into four payment periods. If your income was earned evenly throughout the year, the IRS expected about 25% of your total tax to be paid by each of these deadlines: April 15, June 15, September 15, January 15 (Your Dec 29th payment fell here).
Because you only had $268 withheld from your paychecks during the first three quarters, the IRS sees you as being "underpaid" for April, June, and September. The $57 penalty is essentially interest the IRS is charging you for "borrowing" the money you owed them during those first nine months of the year.
It feels like a contradiction to get a refund and also a penalty. The penalty exists because you "underpaid" from January through September. To the IRS, those are two separate events.
You may have an option, depending on how your income is earned throughout the year by using the Annualized Income Installment Method. If you didn't earn your income evenly , you can tell the IRS that you didn't actually owe the tax until the 4th Quarter. To do this:
- Go to the Underpayment Penalties section (under "Other Tax Situations").
- Look for the Annualized Income interview.
- You will have to enter how much you earned in each specific quarter. If the math shows you earned most of your money late in the year, TurboTax will generate Form 2210 and the $57 penalty should drop or disappear.
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This answer has been verified for accuracy by an Intuit expert employee
