Michigan State underpayment, interest & penalty software bug?

Forum|Forum|3 months ago
April 24, 2026
7 replies
731 views

TurboTax said we owed interest and a penalty for Michigan (but not Federal) taxes for underpayment of estimated taxes. We paid, but then received a refund check for that amount. Is this a bug, or what did we do wrong?

Monikak11

Level 2

We don't have any current reported issues with Michigan penalty calculation. It could be that the penalty didn't apply due to the amount of your prior year tax liability, if that information wasn't entered into TurboTax.

Michigan imposes penalties and interest for the underpayment of estimated income tax if you do not pay enough tax throughout the year through withholding or quarterly estimated payments.

Penalty and interest is charged for the following reasons:

Estimated payments were underpaid in one or more quarters
Estimated payments were received late
Note: Payments that are not received by the due date will be applied to the following estimated tax quarter
No estimated payments were received
You received income unevenly during the year and did not annualize your income

The Michigan Department of Treasury follows the Internal Revenue Service (IRS) guidelines for estimated tax requirements. Based on the IRS estimated income tax requirements, to avoid penalty and interest for underpaid estimates, your total tax paid through credits and withholding must be:

90% of your current year's tax liability or
100% of the previous year's tax liability or
110% of your previous year's tax liability if your previous year's adjusted gross income is more than $150,000 ($75,000 for married filing separately)

rjcbbbAuthor

Level 2

Because I've been using TurboTax for a couple of decades, I presume (perhaps incorrectly) that it would have kept track of prior years' tax payments, etc. Michigan recently sent 27,000 mailings telling residents that their estimated tax payments had not been properly recorded. They are now sending mailings retracting that statement. This may or may not be related, but it points to sloppiness in the treasury department. Just the same, we cashed the check from Lansing and will keep copies of our checks or bank transfers of estimated taxes.

Vanessa A

Level 15

TurboTax generally does NOT track your estimated or quarterly payments. You would need to enter them when you file your return. You can do this by selecting the following:

Federal
Deductions and Credits
Estimates and Other Taxes Paid
Estimates

It is ALWAYS good to keep copies and records to show you made payments, but in looking up this issue it does look like MI did say it was an error in their system.

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