Your liability for penalty computation purposes is the amount you owed on the prior year return. This is a part of the computation when determining the amount of Underpayment penalty. If you did not owe in 2019 you can ask that the penalty be waived. They base that decision on your history. Did you owe State taxes for 2019? How much? That is your liability.
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.
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