Yes, the software is trying to calculate whether or not you will owe an underpayment penalty on the AR tax return by comparing your current year AR tax liability against the prior year tax liability.
Changes made to the AR withholding rates during 2020 actually caused AR taxpayers to have less withholding taken out of their income resources during the year vs prior years (like W2's, 1099R's, etc.). TurboTax is asking for your prior year tax liability in order to try to exclude or reduce any underpayment penalty calculated on your return.
In order to avoid the AR underpayment penalty, you must meet ONE of the following requirements whether or not there is a balance due on the AR return:
- Your current year withholding must equal at least 90% of the current year AR state tax liability, or
- Your current year withholding must equal at least 100% of the previous year tax liability.
TurboTax must have the amount of the prior year tax liability provided in order to make the comparison for your correct and accurate tax return and complete the AR form so that the state will not later calculate the underpayment penalty if qualified not to owe it.
AR Estimated Tax Payment Guidelines
