It depends. According to this IRS link, you may have been assessed an estimated tax penalty because you should have made estimated tax payments last year. Here are the possible reasons for the penalty.
- If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
- Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. More than likely, you owed more than $1000 this year.
You can avoid paying the penalty if:
- You didn't make a required payment because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
- You retired (after reaching age 62) or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect.
If you qualify for these exceptions, Turbo Tax will address this in the program.
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