I ASSUME TurboTax has calculated an underpayment penalty.
If that's the case then the reason you're assessed an underpayment penalty is because your taxes paid during the year - withholding and/or estimated taxes - didn't get you into one of the "safe harbors" for avoiding the penalty. Most taxpayers will avoid being underpaid if they:
1)owe less than $1,000 in tax after subtracting their taxes WITHHELD and available tax credits,
OR
2)if they paid at least the lesser of
a)90% of the tax for the current year, or
b)100% of the tax shown on the return for the prior year. (If last year's return shows AGI over $150K (for married filing jointly) then change that "100%" figure to "110%.)
Frequently when people run into this problem it's because they recognized a big capital gain in the last few months of the year. Since the penalty is calculated on a quarter-by-quarter basis with the initial assumption being that all income comes in "smoothly" during the year, I advise then to "annualize" their income, which means that the tell the IRS in which quarter the large capital gain arose. This pulls income out of the first two or three quarters, reducing or completely eliminating those "early" quarter penalties. If you really did sell those stocks very close to the "beginning of the year" annualizing would work against you here.
You can ask the IRS for relief from the penalty in some circumstances:
The US income tax regime is incredibly complicated, just about impossible for anyone to understand, and if you've not had underpayment penalties in the past you might be able to get any penalty waived.
Tom Young
I ASSUME TurboTax has calculated an underpayment penalty.
If that's the case then the reason you're assessed an underpayment penalty is because your taxes paid during the year - withholding and/or estimated taxes - didn't get you into one of the "safe harbors" for avoiding the penalty. Most taxpayers will avoid being underpaid if they:
1)owe less than $1,000 in tax after subtracting their taxes WITHHELD and available tax credits,
OR
2)if they paid at least the lesser of
a)90% of the tax for the current year, or
b)100% of the tax shown on the return for the prior year. (If last year's return shows AGI over $150K (for married filing jointly) then change that "100%" figure to "110%.)
Frequently when people run into this problem it's because they recognized a big capital gain in the last few months of the year. Since the penalty is calculated on a quarter-by-quarter basis with the initial assumption being that all income comes in "smoothly" during the year, I advise then to "annualize" their income, which means that the tell the IRS in which quarter the large capital gain arose. This pulls income out of the first two or three quarters, reducing or completely eliminating those "early" quarter penalties. If you really did sell those stocks very close to the "beginning of the year" annualizing would work against you here.
You can ask the IRS for relief from the penalty in some circumstances:
The US income tax regime is incredibly complicated, just about impossible for anyone to understand, and if you've not had underpayment penalties in the past you might be able to get any penalty waived.
Tom Young
No I am unable to get TT to enter the estimated tax I paid for 2020 and also unable to find a way to enter it manually via override or other
In TurboTax Online, enter estimated tax payments:
In TurboTax Desktop Home and Business: