Form 2210 - TurboTax calculates a penalty for CA resident even though IRS approved 2023 delayed estimated tax payment date of Oct 16, 2023 was met.

[Brownsfan1]

CA residents of many counties were allowed to delay paying their estimated taxes for 2023 Quarters 1-3 until October 16, 2023.  An estimated tax payment for Q1 - Q3 was made by that date.  However, on Form 2210 (and consequently Form 1040), TurboTax is calculating an underpayment penalty.  How should the estimated tax payment be entered in TurboTax to eliminate the underpayment penalty as the authorized IRS delayed payment date was complied with.

[MarilynG1]

Even though the delayed payment dates are legitimate, use the dates that TurboTax fills in for your for your Estimated Payment Dates for Quarters 1-3.

This should resolve the Underpayment Penalty issue. 

Here's more info on Estimated Tax Payments. 

[Brownsfan1]

Thank you MarilynG1 very much for your reply.  Your suggestion does eliminate the calculated underpayment penalty by the TurboTax program, however if the return is e-filed won't there be a discrepancy with IRS records.  Specifically, the IRS received a lump sum payment representing Q1-Q3 estimated taxes on October 16, 2023, however the completed Form 2210 in TurboTax will indicate this estimated tax payment was made one-third each on April 18, June 15 and September 15, 2023. 

Would it not be best for TurboTax to update the program to allow for entry of the actual date the estimated taxes were paid in conjunction with a new program Yes / No question asking whether the taxpayer was covered by the delayed IRS tax payment deadlines?   

Thank you again very much for your help.

[MonikaK1]

No, the deadlines can't be changed in the software, because the disaster relief is an administrative decision by the agencies applying only to certain individuals and not a change in the law. Because the Federal and California extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations, the deadlines themselves aren't updated in the software.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

See this IRS webpage for more information.

[TEM12]

You are suggesting that we put entries we know are incorrect (payment dates) into our return.  Wouldn't it make more sense to enter our actual payment dates and then check the box for Penalty waiver with the explanation our payment date was extended due to IRS Notice XXX?

[Brownsfan1]

Thank you for your reply MonikaK1.  I would like to clarify though that you are advising that the estimated taxes paid and the associated payment date should be input within Form 2210 as actually occurred, i.e. input the extended deadline payment date of October 16, 2023 and the associated Q1 - Q3 lump sum estimated tax payment amount.  As mentioned in my intial post, when following the aforementioned process, the TurboTax program calculates a late payment penalty.  Consequently, it appears you are advising that I let the program calculate and include the penalty amount as an additional amount owed or a reduction of refund and expect that after filing the IRS will refund / abate the penalty amount.  Is my understanding correct?  If I misunderstood your response, I apologize.  Thank you.  

[MonikaK1]

Yes, you can let TurboTax calculate the penalty even though you won't owe a penalty due to the disaster relief provisions of the IRS and the state. 

If you have taxes due with your return, and a penalty for underpayment of estimated taxes is calculated by TurboTax, it will ask whether you are covered by a disaster declaration, and you can request a waiver of the penalty. 

If you live in a federally declared disaster area, and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty and you do not need to pay the penalty.

You can visit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct.

See here for the IRS requirements for the California disasters for 2023.

If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.

[Brownsfan1]

Hi MonikaK1,

Thank you very much for your response.  I was not aware that the TurboTax program allowed you to request, through the interview process, a waiver of the calculated underpayment penalty.  Consequently, after requesting the waiver and providing an explanation for the request, the penalty amount was removed from the tax return.  

Thank you again.

[Brownsfan1]

Hi TEM12,

Thank you for your response - it appears that your suggestion, as also advised by MonikaK1, is the best method to address the waiver and removal of the underpayment penalty.