Underpayment Penalty

Forum|Forum|1 year ago
March 13, 2025
1 reply
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I expect to receive a 2024 refund, but have also been assessed a modest penalty. The penalty stems from me paying far more in estimated taxes for 3Q and 4Q 2024 than for 1Q and 2Q. This has given the appearance that I am deliberately back-end loading my estimated tax payments. But since most of my income is not predictable, this is not true. I cannot know what my income will be until the end of any given Q. As it turns out in 2024, I realized much less income in 1Q and 2Q than I did in 3Q and 4Q. Therefore larger estimated tax payments for 3Q and 4Q is a given, expected outcome...and not a deliberate attempt to avoid paying most of my estimated taxes until late in the year.

So should:

I go ahead and file my taxes and request a penalty waiver in Form 2010, while also keeping an appointment with the IRS to discuss the matter in person, if necessary?

Go to the appointment first, discuss the matter with the IRS, and then file my taxes?

ThomasM125

Level 15

You should file the tax return first and prepare the Form 2210 to annualize your income for purposes of calculating the late payment of tax penalty. It would be hard for the IRS to do anything about it until the penalty is assessed. Once the payment is assessed, you can decide if you want to protest it by contacting the IRS.

You prepare Form 2210 in the Other Tax Situations menu in TurboTax, then Additional Tax Payments, then Underpayment Penalties.

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1ABCAuthor

Level 2

I did file my return about a week ago. And I am going to, I think, cancel my appointment with the IRS. I realized that I was burning up too much psychic energy about a very small underpayment penalty. So if my waiver request is disapproved, it is really not a big deal.

However, I remain concerned about the Schedule of Estimated Tax Payments for 2025. The amount for each quarter, which is based upon what I paid in 2024, is outrageous. I was extremely fortunate in 2024, but I judge it impossible that I will have a like year in 2025...or anything even close.

Therefore:

When my 2025 income proves to be a much smaller amount, quarter after quarter, I intend to simply ignore the "recommended" estimated 2025 tax payment amount found in my 2024 return....and then pay the correct amount.

Will I still have to pay estimated taxes in 2025? Undoubtedly. But it will be an amount that is grounded in reality....and not some crazy number based on an exceptional 2024.....a year that will not be repeated in 2025.

1ABC