TurboTax Deluxe for Tax Year 2023 calculates a penalty for late payment of estimated federal and California state taxes. But we live in a county listed as a disaster area in announcements by both the IRS and the California Franchise Tax Board that made the deadline for all tax payments, including estimated taxes, 16 October 2023. Consequently, estimated taxes not paid in January, April, June, and September are not late until 17 October 2023. How to get TurboTax to recognize that due to the disaster declaration we did not make late payments and therefore not to calculate a penalty for underpayment (late payment)?
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For the federal tax return, at the end of the underpayment penalty section in TurboTax you come to a screen that says "Let the IRS Bill Me Later." That screen has two buttons: "Let the IRS Bill Me Later" and "Pay It Now." If you click "Let the IRS Bill Me Later" the penalty will be removed from your Form 1040.
Got it. Done that. But that is avoidance, not a TurboTax solution.
1. Responses from TurboTax support indicate that TurboTax "knows" about disaster declarations and should not calculate the penalty. I have not found the path to accomplish that.
2. The California return apparently does not have a similar path (let the California Franchise Tax Board calculate the penalty). The available strategy seems to be to request a waiver. But a waiver is not needed! There was no late payment.
In sum, I am looking for a TurboTax solution, rather than strategies to by-pass TurboTax.
Extended discussion with TurboTax Tax Expert.
1. TurboTax should recognize disaster declarations and incorporate them in its calculations.
2. But, TurboTax is not recognizing the winter storm disaster declaration for specified California counties, 2022/2023 (which set the deadline for all tax payments, IRS and California, to 16 October 2023).
3. Consequently, TurboTax calculates a late (under) payment penalty for estimated taxes paid before the October 2023 deadline. That is, the payments were not late, but TurboTax assumes they were late.
4. For federal taxes, work-around is as above: let IRS calculate the penalty. Since the IRS knows there was no late payment, there will be no penalty for late (under) payment.
5. For California taxes, there is no similar option to let the Franchise Tax Board calculate the penalty. My work-around: request a waiver of the penalty. That works, but that should not be necessary.
6. An alternative work-around: change the payment dates for estimated taxes to the expected dates earlier in the year. That is, tell TurboTax all payments were made on time. Technically incorrect to say that payments made in October were made in April or other earlier months, but, I suppose ethically honest, since taxes were paid on time. TurboTax does not submit the payment worksheet with the federal and state returns.
7. The Tax Expert agrees: not satisfactory . . . but workable.
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