Having trouble annualizing my state income to avoid underpayment interest on Maryland Form 502UP

[jtk2107]

I made four unequal quarterly estimated state/local income tax payments to Maryland during 2019 because my income wasn't received evenly throughout the year. I'm now trying to complete Maryland Form 502UP to avoid underpayment interest charges. However, Turbotax Premier isn't letting me enter data for the four individual quarterly installment periods on lines 11 through 14 of Maryland Form 502UP. It just jumps to the year-end totals and shows zero underpayment for the entire year, as if that ended the inquiry. I'm not so sure the state comptroller will agree.

I meet the safe harbor provisions for 2019, in that I've already paid state/local income taxes (thru withholding and quarterly payments) that exceed 90% of my 2019 tax liability, and that also exceed 110% of my 2018 state and local tax liability. However, other posts on this site make clear that it's still possible to get hit with underpayment interest charges even if one is expecting a state/local income tax refund for the year. Moreover, the instructions for Maryland Form 502UP state "overpayments in later quarters may not be used to offset underpayments in previous quarters." Thus, I need to provide quarterly figures.

If I can't override this glitch (or what I believe to be a glitch), I'll probably have to forego electronic filing of my state/local income tax return and mail in a hard copy. Suggestions?

[AmyC]

Two steps.

1. The quarterly payments are entered in the federal part of the program.
   1. Deductions and Credits
   2. Estimates and Other Taxes Paid
   3. Estimates
   4. Start/Update
   5. State estimated taxes for 2019
   6. Start/Update
2. The Annualized method is in the state part of the program.

Are you using the online version or desktop? That will help with the remaining directions.

Some states will tax you for underpayment even if you have a refund if it does not meet their requirements.

[jtk2107]

Sorry, but that's not helpful. Nothing I have submitted to Turbotax (thus far) for my federal and/or state taxes allows Turbotax to compute how much of each component of my Maryland adjusted gross income I earned each quarter, nor does it allow Turbotax to know how much Maryland income tax was withheld each quarter from my salary income (which fluctuated by quarter).

I need to enter these figures manually in each column of lines 11 through 14 of Maryland Form 502UP, and the program isn't allowing me to do that. I'm using the online version, not the desktop, if that matters.

[AmyC]

I used the desktop the first time to locate the form. In the online version, it is not showing. The desktop supports more forms than the online version. You may want to switch to the desktop product. You can move all the data you have entered and just pickup where you are.

If you have already paid you will need to call for a download to be pushed to you. If you need more help, please use the following link for a customer support number.

[vhmatthews]

I am using the desktop version of TurboTax Premier and I have the same question. I tried overriding lines 11 and 13 of 502UP and it's not letting me e-file. What is the correct way to do this?

[KathrynG3]

If there are any overrides in the program, it must be mailed. 

To not override Lines 11 and 13 of Form 502UP, enter your estimated payments in the Federal interview.

To do this in TurboTax Online and TurboTax CD/Download, follow these steps:

1. From inside the program, enter estimated tax payments in the search box.
2. Select the Jump to link in the search results.
3. Scroll to 2020 State Estimated Payments and enter the date paid and the amount.
4. After this is completed, then, run through the State interview again to get to the Underpayment section. 

For more information, see: 2020 Maryland Form 502UP UNDERPAYMENT OF ESTIMATED INCOME TAX BY INDIVIDUALS

@vhmatthews

@jtk2107

[vhmatthews]

Thanks, I'm not sure this will help. First of all I don't see a search box in the download edition. I'm also not sure what you mean by the interview; I use the Step-by-Step view. Finally, I did already enter my state estimated tax payments by date. What I can't figure out how to do is to break out my taxable income by date (by quarter).

If the only way to do that is to override the values in line 11 and file on paper, can I get back the $25 that I paid for the e-file?

[BillM223]

@vhmatthews

"First of all I don't see a search box in the download edition." - If you are using the CD/download software on a Mac, there is no Search function; instead you look for the search item in the Topics List. 

"I'm also not sure what you mean by the interview; I use the Step-by-Step view." - these terms are interchangeable to us.

"Finally, I did already enter my state estimated tax payments by date. What I can't figure out how to do is to break out my taxable income by date (by quarter)." You are able to enter the income by quarter AND the uneven employee withholding (if any) in the Maryland interview. You already know how to enter the estimated tax payments by quarter.

"If the only way to do that is to override the values in line 11 and file on paper," - it is not necessary to do this. You can enter what you need to in the step-by-step interview.

***

@jtk2107 and vhmatthews

Yes, you can annualize your income on the Maryland Online return.

In the MD interview, you should see a screen with the title "Underpayment Exception". Answer No.

On the screen "Underpayment Interest", answer Yes.

On the screen "Your Interest", check the box for "Use annualization method".

This will start the interview that you are looking for. Note, you may not see this if you don't owe an underpayment penalty; otherwise, you should (I am looking at these screens right now).

[vhmatthews]

How do I get to a screen that says "Underpayment Exception?" I am clicking through all the pages in the step-by-step and I just don't see it. This is very frustrating. Please tell me how to get there from square one.

[BillM223]

@vhmatthews

The dynamic nature of the TurboTax screens can make navigation difficult.

I got there this way:

1. "A few things before we wrap up your state taxes", click Start

2. On the next screen, enter the date you expect to file - for better or for worse, I put 04/15/2021

3. On the next screen I said that I was NOT a first time filer in MD

4. On the next screen I entered my tax for 2019 to be larger than my current tax (if I entered a smaller number I would get a different path).

5. Say no to being a Fisherman

6. The next screen is "Underpayment Exception". I answer NO

7. The next screen is "Underpayment Interest". I answer YES to reduce the penalty

8. The next screen is "Your Interest". I choose the third option: "Use annualization method"

9. The next screen asks for for your income per quarter

10. The next thing is that it tells me if my underpayment penalty changed.

Sadly, I am not sure that this is the same path I took the first time - but you see that the screen you were asking for is #6.

Good luck.

[vhmatthews]

Thanks, that's the kind of detail I'm looking for, but I'm afraid it didn't help. I do have a screen that says "A few things before we wrap up your state taxes." It has seven buttons on it, some labeled Start and some labeled Revisit. Those buttons correspond to Donate to a Maryland Fund, Voter Registration and Absentee Ballot Request, Estimated and Local Income Tax, Apply Overpayment, Extension of Time to File, Amend a Previous Maryland Return, Sign Up for an Electronic 1099-G.

I clicked them all, and none of them leads to a screen that asks "enter the date you expect to file" or asks any of the other questions you listed. Can you think of another way to get there? Should I scrap the state return and start it over in case I took a wrong turn somewhere, and if so how do I do that?

[vhmatthews]

Okay, since I don't have a workable answer I'll have to file a paper return. How do I get my $25 back, please?

[joegeodesist]

I have same symptoms as vhmatthews, 
I can annualize income on Federal interview, but cannot find equivalent in Maryland state interview.
The form view MD 502UP shows income spread evenly across year (contradicting the Federal form) and does not allow editing.
I spent an hour on phone with TurboTax expert, and they were flummoxed too. 💔TurboTax fail.

2023 update: form view now allows editing of withholding & income per quarter. 😎

[BillM223]

@vhmatthews

Are you using the Mac version of the CD/download software? This is the kind of information I need to file a report - since I can't reproduce this on the Windows platform.

@joegeodesist

1. Same question, are you using the Mac version of the CD/download software?
2. Also, did you indicate that this was the first year that you filed a Maryland return? The underpayment question and the annualization option won't appear if you check that this is the first year you have filed a Maryland return (see my answer above of the steps I took)..

[joegeodesist]

Yes @BillM223, using TurboTax Deluxe 2020 downloaded to older iMac using modern macOS Big Sur.

Following BillM223's instructions, this version does have under Maryland > Other Situations "A few things before we wrap up your state taxes", but no "Start" button, just 6 "Revisit" buttons. I've been through each interview numerous times to no avail, the relevant interview jumps straight into "Estimated Taxes for 2021?"

This is not the first year we have filed a Maryland return, or first time using TurboTax here, but we didn't use TurboTax last year. 

Using the TurboTax Help Center in ScreenShare mode, for over an hour, the intuit 'expert' couldn't figure it out either, and was apologetic but didn't seem surprised.