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Guangle
Level 1

Hawaii Tax Underpayment Penalty

After I filed my Hawaii tax return, it shows that there is a penalty for underpayment. However, I already paid all the tax I owed. After checking, I'm wondering that the penalty might be derived from no-withholding of income. It shows that one may owe the penalty for 2020 if the total of withholding and timely estimated tax payments were less than the smaller of :

1. 60% of 2020 tax, or

2. 100% of 2019 tax.

Since my income was in forms of stipends instead of wages and was not subject to tax withholdings. Does this mean I must pay the penalty if I paid all the 2020 tax this month?

Should I pay quarterly estimated tax payments to avoid this penalty in 2021?

What is your suggestions?

Thank you!

1 Best answer

Accepted Solutions
HelenC12
Employee Tax Expert

Hawaii Tax Underpayment Penalty

@Guangle 

 Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive your income, rather than paying at the end of the year.

 

Yes, you should pay estimated quarterly taxes based on what you earned for the quarter. 

For federal income tax purposes: 

You may owe the penalty for 2020 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:

  1. 90% of your 2020 tax, or
  2. 100% of your 2019 tax. Your 2019 tax return must cover a 12-month period.

Tip: To reduce or possibly even eliminate your underpayment penalty,  search for annualizing your tax (use this exact phrase) inside TurboTax. This will take you to the underpayment penalty section and we'll take you through the steps to possibly reduce your underpayment penalty. (If you don’t see Jump to annualizing your tax in the search results, make sure you’re in your return and not on the Tax Home page.).

 

[Edited 3-18-2021|10:20 AM PST]

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2 Replies
HelenC12
Employee Tax Expert

Hawaii Tax Underpayment Penalty

@Guangle 

 Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive your income, rather than paying at the end of the year.

 

Yes, you should pay estimated quarterly taxes based on what you earned for the quarter. 

For federal income tax purposes: 

You may owe the penalty for 2020 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:

  1. 90% of your 2020 tax, or
  2. 100% of your 2019 tax. Your 2019 tax return must cover a 12-month period.

Tip: To reduce or possibly even eliminate your underpayment penalty,  search for annualizing your tax (use this exact phrase) inside TurboTax. This will take you to the underpayment penalty section and we'll take you through the steps to possibly reduce your underpayment penalty. (If you don’t see Jump to annualizing your tax in the search results, make sure you’re in your return and not on the Tax Home page.).

 

[Edited 3-18-2021|10:20 AM PST]

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

Guangle
Level 1

Hawaii Tax Underpayment Penalty

Thank you for your reply. Now I get the right way to pay the tax for my no-withholding income. 

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