Problem with underpayment penalty calculation for Montana

[Crazyleaf]

When I filled my taxes in Turbotax for the state of Montana (for 2025), it calculated an underpayment penalty of $7. I believe this is a problem with the software. I entered the dates I made the actual payments (4/15/2025, 6/15/2025, 9/15/2025, and 1/23/2025). It then asked me when I would be paying the underpayment (of $85) as well as the $7 penalty calculated and I put the date of 3/14/2026 as I WAS going to pay when I filed. When I finally found and reviewed the calculation today, it showed that each of my estimated payments were made on 3/14/2026 even though I actually made the payments as stated above. Does anyone know who I can talk to at Turbotax about this? I don't want to amend my taxes for $7, but they need to know there is a problem with the software. I spoke with someone in the help center and with an "expert" but neither knows how the calculation is made and couldn't help.

[MelindaS1]

I'll take a look at it, if you share your diagnostic file. Please tag @MelindaS1 in your response. Instructions:

You can provide a diagnostic copy of your tax data file so that someone here can take a closer look. The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.  

If you would like to provide us with the diagnostic file, follow the instructions below and post the token number along with which version of TurboTax you are using and what states you are filing in a follow-up thread.  It would be helpful to have a screenshot of the token number to prevent it from being redacted.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

[Crazyleaf]

I'm not sure if I did it right, but I shared the diagnostic version. I dont know if it tagged you or not. The token number is 1341943. I was using the online free version. Please let me know if you need anything else. @MelindaS1 

[MelindaS1]

Thanks for the token. It looks weird with how it prints, but the good thing is it's not calculating wrong. If you look at how the form works, it asks for the date you paid the amount on Line 10 (underpayment), but the only quarter in which you have an underpayment amount on Line 10 is Q4. That's why only Q4 is calculating an underpayment penalty on Line 14. So you have nothing to worry about. Those dates are not included in the calculation for the other quarters, and there's no penalty being applied to the other quarters at all. See below:

[Crazyleaf]

• Okay, but my understanding is that for Montana, if the underpayment is less than $500, there should be no penalty. @MelindaS1 

[Crazyleaf]

Oh, and I made the last payment on January 23rd, not March 14th. I indicated this in the part of the form where it asked when I made each payment. So, to clarify, I made four $900 payments. Each of the first three payments were made by the due date. The final payment, the January payment, was made 8 days late. Not 90 days late. The March 14th date came from where it asked me when I was going to pay the taxes I owe (of $85 + the $7 penalty the program says I owe). @MelindaS1 

This would be so much easier to explain if I could talk to you on the phone.

[MelindaS1]

I double and triple and quadruple checked, because I definitely see the same logic you're seeing - the late Q4 payment was 8 days, not 90 days - but, the form instructions state that all quarterly payments must be timely. And the way they calculate the underpayment interest in Q4 is particularly punishing for someone who both 1) missed the Q4 deadline and 2) owes additional tax on their current MT personal income return. 

It seems they should allow for the interest to accrue for 8 days on the "full" estimated underpayment (1 dollar, roughly), and then the remaining 72 days on the actual balance due which was only $85 in your case, but instead they lump the balance due in with the late Q4 interest, (because the requirement of 90% of your CY tax liability or 100% of PY tax were not paid by the final quarterly deadline, the 15th). That means you're subject to how they calculate this - interest on everything, until the CY final tax is paid in full, in this case, the remaining $85 on 3/14/2026. 

And so that's why you can't change that date to 1/23/26 in the software - the remaining balance due wasn't paid then.

You can see how this works by noting that line 10 is figured from line 3 and line 5, and that line 3 ultimately is based on 90% of the final CY tax due for the year (line 1) - this includes 90% of the $85 balance due with the return - which must have been paid by 1/15/2026 to avoid the interest calculation (see line 4). 

You can try writing them a letter and attaching a copy of your 1/23/26 payment coupon and asking for an interest penalty abatement, since you paid 98.5% or roughly 99% of your CY tax liability by 1/23 and the remainder by 3/14 - a month before the deadline. You always have the right to disagree with your state department of revenue, and make a request for a more fair calculation of your balance due. (They don't have to agree with you, however).

The good thing is that you were successfully above the '100% of PY tax' threshold, so if you make 4 timely payments this year using that method, you'll be able to avoid this altogether a year from now.

EST-I instructions.