topic California Form 5805 (Underpayment Penalty) uses incorrect interest rates in Get your taxes done using TurboTax

California Form 5805 (Underpayment Penalty) uses incorrect interest rates

ssel — Tue, 17 Feb 2026 07:24:22 GMT

The penalty is supposed to be calculated at 8% of the underpaid amount through 6/30/25, plus 7% of the underpaid amount from 7/1/25 onward. TurboTax reversed these numbers: it is actually computing the penalty using 7% though 6/30 and 8% afterward.

Re: California Form 5805 (Underpayment Penalty) uses incorrect interest rates

DaveF1006 — Thu, 26 Feb 2026 13:49:38 GMT

Yes, you are correct. f TurboTax is using 7% for the first half of the year (when it should be 8%) and 8% for the second half (when it should be 7%), it is miscalculating your penalty. Depending on when your underpayments occurred, this could either cost you extra or leave you under-penalized (which the FTB will eventually correct and bill you for).

Since you cannot manually edit the interest rates in the TurboTax interview, you do have an option to let the FTB calcualte for you. You are generally not required to file Form 5805. The FTB’s systems are programmed with the correct rates and they will calculate the penalty for you automatically.

In TurboTax: Go to the Underpayment Penalty section in the California interview.
The Choice: Select the option that says "I want the Franchise Tax Board to calculate my penalty and send me a bill."

The benefit to this is that it removes Form 5805 from your return entirely. If you actually owe a penalty, they will send you a notice. If the penalty is small, they may waive it entirely. This is an advantage to you because you might lose if you calculate and pay it yourself.

Re: California Form 5805 (Underpayment Penalty) uses incorrect interest rates

ssel — Fri, 27 Feb 2026 00:36:11 GMT

I was able to correct these percentages in Forms mode by overriding values on the "Underpayment Statement".

In my case the penalty that the FTB would calculate on their own, without any quarterly info, would be fairly high. The penalty when I calculate it myself using quarterly info is much lower. So no point in waiting for the FTB to send me a large bill... better to be proactive.