Does the prior year tax still apply as an exception for paying a penalty? If so, what form is it on and what line is it on in that form?

[Rachel_W · Accepted solution]

Yes, if you paid 100% of the tax shown on your 2016 Tax Return [110% if your AGI was over $150,000 for MFJ, $75,000 for MFS], you will not be subject to the Underpayment Penalty.  Your 2016 Federal Tax Liability is shown on Form 1040 (line 63), Form 1040A (line 39), or Form 1040EZ (line 12).  

The Underpayment Penalty also does not apply if:

• You paid 90% of the tax liability shown on your 2017 Tax Return
• The tax due after subtracting withholding tax is less than $1,000
• You had a zero tax liability on your 2016 Tax Return

If you don't qualify for any of the Exceptions to the Underpayment Penalty above, you still may be able to reduce or eliminate the penalty by completing Form 2210 (TurboTax will walk you through this).  On Form 2210 you may:

• Request for a Waiver: IRS may waive the penalty in the case of casualty, disaster or unusual circumstances.
• Use the Annualized Income Installment Method 
• Use Actual Payment Dates for Withholding