Because the Federal and state extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations during specified dates, the deadlines themselves aren't updated in the software. The tax agencies made an administrative decision not to impose the penalties, but since the law itself didn't change, tax software including TurboTax still calculates the penalties.
If you live in a federally declared disaster area and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty.
Visit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct.
If you have taxes due with your return, and a penalty for underpayment of estimated taxes is calculated by TurboTax, it will ask whether you are covered by a disaster declaration, and you can request a waiver of the penalty.
See here for the IRS requirements for the California disasters for 2023.
If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
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