I am using Turbo Tax Home and Business. We pay estimated taxes. Always 100% of prior years income. This year we sold our house October 1,2021 for a gain larger than the $500,000 exclusion so I made additional estimated tax payments in December to cover the capital gains tax we would have to pay. As it turns out we are getting a refund for 2021 of around $18,000. So I was surprised to see we were charged a penalty for underpayment in 2021.
I went to the trouble of allocating the exact income and expenses to each of the 3 date ranges of the year they asked for in the program to complete Form 2210. This did reduce my penalty but I noticed an error in the calculations on Form 2210 when calculating the actual penalty.
Last year (2020) we also received a refund, but because we pay estimated taxes we just apply it to the next year. However, when TurboTax compared the tax payment made to the calculated tax installment needed they did not take into consideration the over payment amount we applied from the previous year.
Example: Our 4/15/21 estimated tax payment was $20,000; actual tax payment calculated by TT was $17,000 after completing Form 2210AI. We had over paid 2020 by $$11,000 so after applying that to the 4/15/2021 estimated tax payment we paid $9,000. When TT calculated the penalty they only used the $9,000 payment. Saying we under paid by $8,000 ($17,000 - $9000) the 4/15 payment and based our penalty on that. We had actually overpaid the 4/15 estimated payment by $3,000 ($20,000 - $17,000) when you include the refund from 2020.
I think this is a possible program error that should be investigated. Thank you.
