@Michele-Frank
1) Make sure you've actually entered your quarterly state estimated tax payments in the 2025 program....if they aren't in there (with actual dates of payment), then the penalty is because those payments are not yet accounted for. Switch to Forms Mode, and look at the "Tax Payments" worksheet in the Federal area...that worksheet shows all the Fed-State-Local quarterly estimated payments the tax software has recorded
2) Of course, the estimated payments calculated on your 2024 filing? They were determined based on certain assumptions you made concerning how much income you "expected" to have during 2025. IF you went over that guess of 2025 income amount by too much, then that may have resulted in your final calculated 2025 state tax exceeding what you expected....Then IF what you now owe at 2025 tax time, exceeds a certain $$ amount , then the state assesses and underpayment penalty (varies by state....some that I've seen say amounts over $500, others use perhaps owing more than $1000 extra.). The Estimated forms were just a first guess as to what you'd owe for 2025. It happens. Overestimating what you expect one year can avoid it, but you risk paying extra $$ to the Govt to keep and then refund you later. Yeah it's a guessing game.
3) Anyhow if your entries are all correct, but you don't like the penalty amount, most states have a tax form 9accessed in the Other Tax Situations area of the state interview0 that let you "annualize" your income by quarter, to see if the penalty can be reduced or eliminated. This usually works if the majority of your excess income occurred during the last quarter or two (especially for those who get large distributions from Mutual funds in December). But if the major part of your income occurred in the first two quarters...the annualized income forms usually won't help, and you just have to eat the extra penalty.
(the form is usually a real pain to fill out, and one has to be ready to spend a couple weeks on it....or engrossed full-time all of one weekend. I've done it once and won't bother for a penalty of $50 or less, and would really think long before attempting it if penalty was less than $100)
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
