My tax penalty is calculated as if my income was steady over the year, which it was not (most was received at the end). How do I do this correctly in Turbo Tax?

[maglib · Accepted solution]

You will have to annualize your income to appropriate quarters if you want to reduce a tax penalty.

The first qtr is just Q1, The 2nd qtr is total of q1 plus q2, then 3rd is q1+q2+q3 and so on.

Annualizing your income may allow for a reduced underpayment of taxes penalty,  as the IRS system assumes that you earn income evenly throughout the year and therefore your taxes would have had to have been paid evenly throughout the year. We are required to pay tax as we earn income or there is a penalty.  In many cases bonuses and sales of stock in the 4th quarter can cause penalties that are not accuarate so you must annualize your income.

If you select to annualize your income then you'll enter the amount you earned each quarter. TurboTax will complete the form MI-2210 for you. If you earned more income near the end of the year, then this is worth doing to reduce your penalty.  If not (if you earned evenly throughout the year), then there's no need to select this option

In TT in the top right box search ANNUALIZING INCOME then JUMP to that section and it will take you through the interview and then your penalty may be reduced.

I hope this helped?

[Critter]

To reduce or possibly even eliminate your underpayment penalty, search for annualizing your tax (use this exact phrase) in the search box.    This will take you to the underpayment penalty section, and we'll take you through the steps to possibly reduce your underpayment penalty.

[mrkk1]

I completed form and provided explanation. It did not print with my return. I assume due to non receipt of credits for Covid. I still need that form filed. Do I need to file one separately and get form from IRS.gov?

[fanfare]

@mrkk1 

you should start your own thread and identify what form you are referring to.