1099-R triggers a penalty for late payment of taxes

[suprheat]

When I input a 1099-R, TurboTax does not ask for a date of distribution. It does ask for date(s) on estimated tax payments. So I took a large IRA distribution in December of 2021 and made an estimated tax payment at the same time.  TurboTax wrongly assigns the large distribution as income for the full year and thus throws a penalty for late payment of taxes and it puts in the estimated tax coupons for the following year. Only way to trick it is to say I made the estimated tax payment in the first quarter.

There needs to be a "Date Received" spot on the input page of 1099s and calculated accordingly.

[VolvoGirl]

If you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year.  Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. It is included in your tax due or reduces your refund.

You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form.  If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column.  Type 2210 in the search box and open the 2210 form.  Check box C to let the IRS calculate it.

Form 2210  https://www.irs.gov/pub/irs-pdf/f2210.pdf

Instructions https://www.irs.gov/pub/irs-pdf/i2210.pdf

[dmertz]

Unless you tell TurboTax otherwise, TurboTax is correct to use the default treatment dictated by the tax code that assumes that your income was received uniformly throughout the year.  To do otherwise it's your responsibility to allocate your income to the various tax quarters on Schedule AI of Form 2210.  You'll do this as VolvoGirl describes, not during the entry of the Form 1099-R.  It's impractical to specify the dates of income receipt during the entry of various items of income because this would have to be done for every type of income.  Also, each form reporting income can represent multiple income events.  

[suprheat]

Thanks, though it's somewhat cumbersome due to the IRS? There should be a simple question in TTax as you input 1099s like, "does the this amount need to be annualized?" and then TTax should go to the section where you can input the date. TTax should fill out the annualize form portion automatically and adjust it if a date is inputted. After all TTax already assumes my AGI is spread evenly throughout the year. Simple calculation: take AGI, subtract any inputted 1099s with a inputted date, spread remainder evenly across the year, add to quarter the inputted with special date. TTax should do this automatically, that is why we buy TTax.

[dmertz]

TurboTax would need to ask that question for every item of income entered.  That's impractical and would be extremely obtrusive for the majority of users .

[suprheat]

I disagree, TTax already asks a lot of questions, what's one more?

[VolvoGirl]

If you got a W2 do you want to enter each paycheck date?  Or a pension?   The underpayment penalty won't apply to a lot of people.  So it would be unnecessary.  

[suprheat]

First of all this pertains to 1099s not to W2s.

And that's why a simple checkbox on the page you enter the 1099 info, that you can choose to ignore, would ask if want to annualize the amount. They could also put the the little question mark thingy and you could click it to explain why you might need to annualize. 

Most people would click the question mark, read it one time, then ignore it for their other entries. And if they had an unusual situation they could click the checkbox and TTax would go to an interview section to ask the appropriate Questions.

[tnone2024]

I have the exact same issue for 2023. A simple option to assign a date to a distribution should be a no-brainer.  For many thousands of retirees, you don't actually owe any tax until you make the distribution so there is no point in paying estimated tax beforehand. This situation isn't always foreseeable either.  Having to annualize your income and expenses manually is kind of ridiculous after you have already entered everything minus a few dates.  TT has stagnated in this area. 

[tnone2024]

Having just done the annualized method I have to say it wasn't that hard, but it could be better automated.