How can i have an underpayment penalty when i work for a company and have only a tax bill for a $1000 lottery ticket i won and a savings bond i cashed in

[Opus 17 · Accepted solution]

Generally, you don't owe a penalty as long as at least one of these statements is true.

1. You owe less than $1000 with your tax return.

2. Your payments into the system (estimated payments or withholding) is at least 90% of your tax liability this year.

3. Your payments into the system are at least 100% of your tax liability for last year.

If Turbotax thinks you owe a penalty, then you probably didn't have enough withheld at your job (too many allowances on your W-4).  The amount of extra tax due on a $1000 prize and one savings bond should not, by itself, push you into penalty territory.  Turbotax may also be incorrect.  

You can decline Turbotax's recommendation to add a penalty, and let the IRS bill you if you really owe a penalty.  When you get the bill, you can request an abatement of the penalty if this is your first time owing a penalty.

Abatement https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penal...