Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Your taxes, your way. Get expert help or do it yourself. >> Get started
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
gryrps
Returning Member

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

I live, work, and pay taxes in New Jersey. I used TurboTax to file my 2020 returns. In my NJ return, I paid $17 in interest on underpayment of estimated tax. The $17 was calculated by TurboTax and form NJ-2210 was filed. Yet, today, I received a bill from the NJ Division of Taxation for Installment Interest. They reported the $17 as "Overpayment" and charged me the balance ($27.84) between the $17 overpayment and their Installment Interest calculation of $44.84. Wasn't the $17 underpayment interest supposed to account for all taxes I was supposed to pay during the year? Was the $17 an incorrect calculation or reported incorrectly so that it was not properly considered by the NJ Division of Taxation? If not, why am I being charged more interest?

5 Replies
Mike9241
Level 15

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

the 2210 penalty calculations in Turbotax are not always accurate. Turbotax uses the dates you entered which can differ from the dates the government agency uses. also there can be an additional penalty if any balance due is not paid by the due date.  Turbotax does not have access to the state's calculation, so you'll need to call if you want further info. there should be a number on the notice

gryrps
Returning Member

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

Hi Mike9241. Thanks for the quick reply! I've paid small amounts of penalty interest many times before, using TT, and never had this issue come up. It is unfortunate that TT does not consistently do the penalty calculation accurately (anymore?) - that makes it of marginal value. What other calculations does TT not do accurately? And I didn't enter dates - as far as I know, the TT penalty calculation assumes the underpayment is spread evenly throughout the year. I also filed the return and paid on time. And, yes, there is a phone number on the notice. I called it before I asked about this issue here. Of course, the number is of no value because a recording comes on that says they cannot help due to large call volume and just hangs up.

fanfare
Level 15

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

If you filed before May 17, the amount calculated on 2210 (Fed or state) should be accurate.

If not, you might try another tax prep software outfit whose software operates correctly.

 

HOWEVER ,

The NJ penalty changes depending on whether you met the payment deadline(s) for the quarter(s).

That is to say, there are two methods of interest calculation.

gryrps
Returning Member

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

I filed ON the deadline date of May 17, so as I mentioned earlier, I filed and paid on time.

 

Perhaps your statement about quarterly payments is the reason....the state document is saying I am being "...charged installment interest because you did not make the following required estimated payments" and lists 4 quarterly payments. Of course, state taxes are taken from my paycheck every month and I'm sure my employer makes the appropriate payments during the year. I owe extra due to dividends and interest. That's why I expected the penalty calculated by TT to cover the underpayment. Shouldn't TT use the correct method to calculate the underpayment? FYI, for 2021, I already increased my state (and federal) withholdings to reduce the amount I owe and perhaps eliminate penalties for 2021 taxes.

gryrps
Returning Member

NJ installment interest penalty - is TurboTax incorrectly calculating or reporting underpayment interest?

8.26.2021 update: Monday last week, I finally got through on the phone to someone at the NJ Division of Taxation (after waiting 45 minutes on hold). The woman was very nice and after quickly reviewing my return, said sometimes upon initial review of a return, they miss the NJ-2210 form (I submitted one). So she sent my issue to another department for review and told me I would get a response in the mail stating the outcome of the review. After 10 days (today), the response came in the mail and said I don't owe anything more! Amazing!! Even though it wasn't a lot of money, I'm glad I don't have to pay anything extra and it now looks like TT did the return calculations correctly. Unless.....of course.....I overpaid..... 🙂

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.49m
Members

2.62m
Discussions

Manage cookies
v