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JW54
Level 1

NC interest penality for under payment being applied in error

The NC tax under payment for tax year 2020 is under $200, why is there a penalty being added with the software.?  This is under the $1000 limit shown on NC form D-422.

1 Best answer

Accepted Solutions
SteamTrain
Level 15

NC interest penality for under payment being applied in error

That can happen if you made one or more quarterly estimated tax payments during the year, but didn't make exactly 4 quarterly payments of equal value.

 

For example:

 

...... if you would have owed 3,000 to NC (ignoring Quarterly estimates) but then only made the 4th quarter payment of a billion $....there would still be an interest payment applied. Even with a huge refund.   

______________________

So to "possibly" eliminate the interest, you would have to go thru the Annualized Income questions in the State tax section to create the form D-422A.  But even then, the interest might not be eliminated....ir really depends on exactly when during the year your income was received...and exactly when your payments (or withholding) was made.

 

 

Example 2:  You perhaps made a huge gain in Jan of 2020, but didn't make an estimated payment to cover it until Dec of 2020.  The annualized income won't eliminate the penalty/interest, because you should have paid for the eventual NC taxes on it during the first Qtr of 2020.....that's what the D-422A determines

 

 

 

 

*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

View solution in original post

2 Replies
SteamTrain
Level 15

NC interest penality for under payment being applied in error

That can happen if you made one or more quarterly estimated tax payments during the year, but didn't make exactly 4 quarterly payments of equal value.

 

For example:

 

...... if you would have owed 3,000 to NC (ignoring Quarterly estimates) but then only made the 4th quarter payment of a billion $....there would still be an interest payment applied. Even with a huge refund.   

______________________

So to "possibly" eliminate the interest, you would have to go thru the Annualized Income questions in the State tax section to create the form D-422A.  But even then, the interest might not be eliminated....ir really depends on exactly when during the year your income was received...and exactly when your payments (or withholding) was made.

 

 

Example 2:  You perhaps made a huge gain in Jan of 2020, but didn't make an estimated payment to cover it until Dec of 2020.  The annualized income won't eliminate the penalty/interest, because you should have paid for the eventual NC taxes on it during the first Qtr of 2020.....that's what the D-422A determines

 

 

 

 

*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

View solution in original post

JW54
Level 1

NC interest penality for under payment being applied in error

Yes, making a proactive one time payment, triggered the interest penalty.  I was able to address this issue by Annualizing the income and tax payments.

Thank you for your reply.

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