Get your taxes done using TurboTax

It is possible to have a refund and still have an underpayment penalty if the payments were not paid equally across all payment dates. If your income calculation was used each period to determine if an estimated tax was required, then you may need to do the annualized method to reduce or eliminate the penalty.

The IRS is a pay as you go system which means when the money is earned the tax is due.

You can choose to use the annualized income/tax method in TurboTax by using the steps below. Have  your 2025 return ready just to confirm your numbers.

1. Open your  TurboTax Online or TurboTax Desktop return
2. Search (upper right) > Type underpayment penalty 
   1. TurboTax Online: Click 'See More' at the bottom of the FAQ that pops up > Click on Go to annualizing your tax
   2. TurboTax Desktop:  Click the Jump to.. link
3. Continue selecting to use the annualized method and enter the income in the slots where earned.  For wages, interest, dividends or anything earned equally through out the year divide by 12 and multiply by 3/5/8. 
4. Continue to follow the screen prompts

Generally, you can avoid the penalty if your total timely estimated payments and withholdings are greater than or equal to the lesser of:

• 90% of the total tax after credits for the current year, or
• 100% of the total tax after credits in the prior year
• See one exception below.

You can also avoid the penalty if the amount you owe is less than $1,000 as long as any estimated tax payments you made are timely.

Note: High-income taxpayers. If your adjusted gross income (line 11 of your 2023 Form 1040) is greater than $150,000 (or $75,000 if you're married and file a separate return from your spouse), you can avoid a penalty by paying at least 110% of your total tax from the prior year.