Form 2210

[user17715173406]

Hi,

I am looking for some help with an underpayment penalty determination.

TurboTax indicates that I owe a $50 penalty for underpayment, even though I have 110% more in withholding and estimated taxes than my tax liability for 2024.

I sold a second home (condo) in mid-September 2025, which significantly increased my tax liability.  For tax year 2024 I owed $38,852 in taxes.  For tax year 2025 I had $21,815 withheld and also paid $21,027 in estimated taxes for a total of $42,842 (more than110 percent of the 2024 liability).  My estimated taxes included: $1352 from my 2024 refund applied to 2025 taxes; $3457 1st qtr; $4809 in qtr 2; $4809 in qtr 3; $6600 in qtr 4. My additional taxes due are about $49,000.

I started preparing Form 2210. However, because Part 1 does not ask for estimated tax payments (only withholding), the result is that I "may owe a penalty", and it appears I would need to do a lot of further calculations in Form 2210 to reduce or avoid the penalty.  

It doesn't seem as though I should be going down this path based upon the 110 percent safe haven rule.  (1) Am I misinterpreting the 110% rule (2) If my interpretation is correct, is there a work-around to avoid doing all the additional calculations? (3) Is it possible that TurboTax is triggering a penalty because my last quarterly payment was higher than earlier quarterly payments?

Thank you.

[baldietax]

by default IRS assumes your income and withholding are even thru the year by quarter, but estimated taxes apply to specific quarters, so you can meet the safe harbor in total but if it wasn't paid evenly thru the year and you had an increase late in the year to make the safe harbor, you will be assessed an underpayment penalty for the earlier quarters.

you can reduce or potentially eliminate the penalty if you adopt the Annualized Income method on Form 2210 under Other Tax Situations / Underpayment Penalty section, to show you had uneven income to line up with the uneven estimated taxes.  You have to calculate a quarterly AGI/withholding/LTCG yourself, it's a lot of extra work, I'd just pay the $50 to avoid the AI form and call this a win, but up to you.

if you are on desktop you can see Form 2210 and the penalty calculation in Forms mode it may not be on your forms list by default unless you adopt an exception method but do Open File and put 2210 in the search, or on Form 1040 you can double click thru Line 38 and again on the worksheet to bring it up.  Not sure with TT Online but I assume it's in the PDF with all forms and worksheets.

[baldietax]

btw there's another option if your withholding was also uneven and backloaded more into later quarters in 2025 you can adopt another exception to use actual timing of withholding rather than assume it was even, that may help reduce the penalty with not much effort, depending your situation.