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Estimated taxes and under payment penalties

For 2022, I was not employed by a company and I did consulting work as a 1099 independent contractor.  I did not receive my first payment until May 23, 2022.  I made an error and did not make any estimated payments until December 2022.  I did not make an estimate for the 1st quarter because I had not even decided to do consulting until end of April.  

 

The question, Turbo tax is calculating penalties because I did not make estimated payments...which I understand.  But what nearly half of the penalty is coming from the 1st quarter when I had no income and hadn't even decided to do consulting.  Is there a way to calculate the penalty using actual income by quarter?  It seems wrong to be penalized for not paying a quarter when I literally had not even considered self employment?

 

Thanks for any help!

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Estimated taxes and under payment penalties

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.

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4 Replies

Estimated taxes and under payment penalties

No, the penalty is calculated based on your tax lability for the entire tax year.

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Estimated taxes and under payment penalties

So the IRS expects me to be clairvoyant?  Why am I acting surprised?  lol 

Estimated taxes and under payment penalties

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.

Estimated taxes and under payment penalties

This was very helpful, is reasonable and makes sense.

 

THANK YOU!

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