California 5805 mystery penalty

[jonathan00013]

I made four timely equal estimated tax payments for 2021. They add up to more than my tax liability for either 2020 or 2021. (My taxable income is less than $150,000.) I completed the "California Carryover Worksheet" and "Tax Payments Worksheet".

Somehow, TurboTax says I owe a $3 penalty, and attaches a "Form 5805" and "5805 Wks II" to my return. On Form 5805, lines 7-12 are empty (there was no underpayment) but a persistent $3 penalty appears in line 13.

The penalty seems to come from "5805 Worksheet II" - line 12 (which shows the $3 penalty) adds up "line 11 in all columns" - but line 11 is all blanks. If I delete any of these forms, they're immediately regenerated. 5805 is supposedly finalized, but the column headings for the Worksheet II Part 1 Payment Due Dates are 7/15/2021, 7/15/2021 (!), 9/15/2021, and 1/15/2022 - Per the CA FTB they should be 4/15/2021, 6/15/2021, 9/15/2021, and 1/18/2022. And it looks like the "Required Installments" are computed incorrectly...

How can I correct this? It isn't material - but it is a worrisome error. Thank you.

[DaveF1006]

It depends. Did you make all of those payments on time or possibly you were a day or two late on one of the installments?

[jonathan00013]

My payment dates (entered in the worksheet) are 4/5/21, 6/9/21, 9/9/21, and 1/10/22. As I wrote above, they were all timely.

[According to TurboTax support, this is a known bug...] -- Not exactly... I think that the only TurboTax problem is the "Payment Due Dates" in Form 5805 Worksheet II Part I - the first column heading should be April 15, 2021 rather than July 15. (The first payment was delayed in 2020, and perhaps that one-time change hasn't been reverted.)

The problem is in the opening line in my original post: "I made four timely equal estimated tax payments for 2021." I am embarrassed to say that today I learned that California's estimated tax payment schedule is 30% in April, 40% in June, no requirement in September, and 30% in January. Equal payments can result in a penalty. Thanks for your patience.

[mountainjoe]

I have the same issue - I paid my $800 California state tax in Q1 but your SW is calculating an underpayment penalty of $25 when $800 is my total tax due. The $800 payment is listed in the Federal deductions. Why is an underpayment penalty being applied?

[Vanessa A]

If you paid $800 in the first quarter of 2022, but then still owe $800, it means you underpaid for the rest of the year.  This would be the reason you are seeing an underpayment penalty. 

California requires that you make estimated payments if you expect to owe more than $500 for the tax year and you expect your withholdings to be the lessor of 

1. 90% of the tax on your current year return
2. 100% of the tax liability on your previous years return. 

If you did not do so, you will receive a 3% underpayment penalty.  

If you are saying you paid $800 and that was your TOTAL tax liability so you should owe nothing, then you may have entered the $800 under federal instead of state.  If this is the case, then you simply need to take the following steps:

• Federal
• Deductions and Credits
• Show More next to Estimates and Other Taxes Paid
• Revisit next to Estimated Tax Payments
• Revisit next to federal estimated taxes
• Walk through delete the $800
• Start next to State estimated taxes for 2022 and enter your state payments. 

[jonathan00013]

I posted the correct answer above: California's estimated tax payment schedule is 30% in April, 40% in June, no requirement in September, and 30% in January. Equal payments can result in a penalty.

My income was uneven, and I was able to avoid the penalty by completing the California "Annualized Income Installment Method Schedule" FTB 5805 Part III.

[mountainzen]

I do not have an underpayment of $800 - my total taxes due is $800 and I paid it in the first quarter. Under the Federal “Taxes, Licenses, and Fees” it has a box to enter State Income Taxes and that is where I entered the $800 payment. You are suggesting I delete this and only enter it in the State section? Then why is there a box for it in the Federal section and would it not be a deductible item on my Federal business taxes?

Thanks, Joe

[AmyC]

Please review your federal entry. There are many options for entering state payment. Please verify that you have the entry under state estimated taxes for 2022. 

Once entered in the federal, the payment will show in the state.

@mountainzen