topic Re: underpayment penalty in Retirement tax questions

underpayment penalty

tiggerpounce — Tue, 24 Feb 2026 05:06:48 GMT

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?

Re: underpayment penalty

DawnC — Fri, 14 Apr 2023 01:34:56 GMT

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.

Re: underpayment penalty

tiggerpounce — Fri, 14 Apr 2023 01:38:40 GMT

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)?

Re: underpayment penalty

BillM223 — Fri, 14 Apr 2023 02:02:17 GMT

"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.

Re: underpayment penalty

fanfare — Fri, 14 Apr 2023 02:14:08 GMT

Form 2210 (default) requires equal estimated tax installments of 25%.

@tiggerpounce

Re: underpayment penalty

tiggerpounce — Fri, 14 Apr 2023 02:23:14 GMT

Even if my total taxes paid for 2022 is more than 110% of my 2021 paid? I paid like 40K in 2021 and more than 60k in 2022.

Re: underpayment penalty

fanfare — Fri, 14 Apr 2023 02:31:07 GMT

Yes, even then.

your own tax return is proof of that.

@tiggerpounce

Re: underpayment penalty

fanfare — Fri, 14 Apr 2023 02:57:37 GMT

It is estimated tax that has to be 100% ( 110% if your AGI is over $150,000) of prior year's tax.

@tiggerpounce

That's the prior year's tax rule,

the other rule is the 90% rule: 90% of the current year's tax.

whichever is smaller, but still must be evenly spread.

Re: underpayment penalty

dmertz — Fri, 14 Apr 2023 11:55:20 GMT

@fanfare wrote:
Form 2210 (default) requires equal estimated tax installments of 25%.

@tiggerpounce

By this I assume that you mean in the absence of annualizing on Schedule AI. However, it's not entirely true. You could pay more in estimated taxes in earlier quarters and less in later quarters as long as you paid at least 25% for the first quarter, 50% for the first two quarters, 75% for the first three quarters and 100% for the year.