CA Tax Penalties, Form 5805

[JJK2]

Situation: retirees, several years. No quarterly payments-unneeded, have tax wh from RMD's (estimating tax liability before it can be computed). This year we ended up owing 19% above calculated tax for our income (sounds like a penalty situation, no?) .. but withholding this year 125% of 2023 tax owed. Is there no actual connection between this year's withholding and last year's tax owed? The 5805 instructions speak about this year's w/h being 110% (or more) negating the underpayment penalty.. but this is stated in a long explanation with multiple conditions (ifs, ors, ands) so am I misreading the instruction?

Second question: is this discussion board supposed to be accessible directly from the TT program?  I could only get to the general Intuit website, which appears to involve no user support at all (i.e., was useless). Had to find this page via Internet search.

[MonikaK1]

For California, you can avoid the underpayment penalty if:

•  The amount of your tax liability (not including tax on lump-sum distributions and accumulation distribution of trusts) less credits (including the withholding credit) but not including estimated tax payments for either 2023 or 2024 was less than $500 (or less than $250 if married/RDP filing a separate return). 
• Your 2023 return was for a full 12 months (or would have been if you were required to file) and you did not have any tax liability on that return. 
• The amount of your withholding plus your estimated tax payments, if paid in the required installments, is at least 90% of the tax shown on your 2024 return or 100% of the tax shown on your 2023 return (110% if California adjusted gross income (AGI) was more than $150,000 or $75,000 if married/RDP filing a separate return) and you are not using the annualized income installment method. Taxpayers with California AGI equal to or greater than $1,000,000 (or $500,000 if married/RDP filing a separate return) must use the tax shown on their 2024 tax return if they do not meet one of the two conditions above.

In the California return interview, the Underpayment Penalty questionnaire doesn't appear unless TurboTax has tentatively calculated a penalty based on the income and payment information you entered. 

In that case, you will see Underpayment Penalty listed as an item under Other Situations and you may also see a screen prompt before you get to the end of the California items asking if you want to go over the penalty section now. Respond "yes" to "Would you like to review this topic?". If yes, you are given the choice to let the Franchise Tax Board calculate the penalty and send you a bill, or to complete the questionnaire.

Complete the questionnaire rather than attempt to override the form. If your answers to the questionnaire result in eliminating the penalty, then Form 5805 won't be included with your return. If you otherwise are liable for the penalty, the FTB will calculate it. 

See this FTB webpage for more information about California penalties.

See here for the link to the TurboTax community. If you are using Desktop, you can go to the Online tool and get there indirectly.

[JJK2]

Thanks. That did seem to put TT on the same page with me reading the CA instructions. Doubt I would have found this resolution avenue myself. Since we've used TT a number of years, and we started this year's work with TT having access to last year's filing (as it has each year), I had expected TT to already know the 2023 values for AGI & tax due and have run the exemption check automatically before calculating a penalty assessment.

Muchas gracias.