underpayment penalty

Forum|Forum|3 years ago
April 14, 2023
2 replies
5 views

Turbo Tax is saying I have a $50 penalty for underpayment. I only owe $500...I thought the underpayment only applied if you owe more than $1,000? I converted an account to a Roth in the 4th quarter and paid a timely estimated tax that quarter...do I need to annualize or something?

DawnC

Level 15

No, you are talking about the need to pay estimated taxes. Underpayment penalties are incurred if you don't withhold or pay enough tax on income received during each quarter. Even if you paid your tax bill in full by the April deadline or are getting a refund, you may still get an underpayment penalty. See Why do I have a penalty? for a way to reduce or eliminate the penalty.

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tiggerpounceAuthor

Level 2

If I didn't convert it until the 4th quarter, how could I have paid the taxes in the other 3 (I paid an estimated tax for it as soon as I converted it)? Where is Turbo Tax getting $50 from (I think I saw somewhere it's 3% which would only be $15 for $500 due)?

BillM223

Level 15

"do I need to annualize or something?" Yes, annualization on the 2210 was made for your situation. Go back to your federal return, then go to Other Tax Situations, then Additional Tax Payments, then Underpayment penalties. I believe that you can access the annualization interview here.

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