2023 TT penalty for underpayment of estimated federal taxes does not agree with manual IRS Form 2210

[michaelmcewen]

2023 TT says I owe a $2 penalty for underpayment of estimated federal taxes.  However, when I complete IRS Form 2210 by hand, Line 7 (difference between 90% of total tax due and amount of tax withheld) is less than $1000, which means I don't owe a penalty.  FYI, my withholdings plus estimated taxes paid in 2023 exceed my total tax due by just over $1000, so I'm getting a refund.

[dmertz · Accepted solution]

Estimated tax payments are applied when paid, so you can have underpayment for earlier tax quarters of the year even if you end up with a refund overall.  Income is treated by default as being received evenly throughout  the year, so if more of your income was was received later in the year you might be able to reduce or eliminate the penalty by annualizing income on Schedule AI of Form 2210.

[Mike9241]

i slight difference maybe 

" 90% of total tax due" do you mean balance due or total libibility?  it's 90% of your current year's tax liability not the balance due.

[michaelmcewen]

@Mike9241 Thank you for the response.  I guess I should have said "current year tax", which is what Form 2210 Line 4 calls it.  It's also the same amount as Form 1040 Line 24, which is called "total tax".

Anyway, Form 2210 Line 5 multiplies that by 90%, which is what Line 6 (withholding taxes) is subtracted from.  The difference is less than $1000, which is too low for a penalty according to Line 7.  However, TT says the penalty is $2.  So, which is correct, TT or Form 2210.

[michaelmcewen]

@dmertz Yes, I understand that I can get a penalty even though I'm due a refund.  However, that doesn't address my issue, which is that TT does not agree with IRS Form 2210 when both are given the same information.

[dmertz]

TurboTax makes its estimate based on the dates of the estimated tax payments to the day, something that the IRS does but Form 2210 by itself does not.  TurboTax's estimate isn't always exact since the IRS might use a different dates for the estimated tax  payments than what you tell TurboTax as the payment dates.