Pennsylvania Capital Gains

[user17704424348]

Since I am retired my only taxable Pennsylvania income is interest, dividends, and capital gains. Since the majority of my capital gains occur late in the year usually in December. I don't know how much I owe till then. This year TurboTax says I owe a penalty due to underpayment. This is the first time that happened, so I wonder if it is a mistake.

[MaryK4 · Accepted solution]

It is probable that you simply did not qualify for the underpayment of estimated tax in past years- because one of the automatic exceptions is the 90% payment of current year's tax liability, you may have been okay in prior years.  Regardless, you can annualize your tax payments in TurboTax.  (It should have prompted you while you were completing the tax return, but it is an easy question to miss.) Go back to the Pennsylvania state tax summary, and Update the Underpayment penalty.  Look for the question Let's See If You Earned Income Unevenly, select Yes and you will be able to show that the income was in December.  

Pennsylvania imposes an interest penalty for underpaying estimated taxes, calculated at 9% per annum on the amount of underpayment for the period it remains unpaid. The penalty applies if total withholdings and credits are less than 90% of the current year’s tax or 100% of the prior year's tax.  See Income Subject to Tax Withholding; Estimated Payments; Penalties, Interest and Other Additions.