TurboTax automatically checked the box because you met the Arizona requirement:
Line 1 - Complete line 1 if you are claiming an exception from the penalty because you qualified for federal relief under Internal Revenue Code § 6654. You may claim either an exception from the penalty, or you may claim a penalty waiver.
Thank you for your response. How do I meet 'the Arizona requirement'?
"Complete line 1 if you are claiming an exception from the penalty because you qualified for federal relief under Internal Revenue Code § 6654"
How did I qualify for federal relief under Internal Revenue Code 6654?
Under Sec. 6654(d)(1)(B), the required annual income tax payment an individual taxpayer is required to make to avoid an underpayment penalty is the lesser of (1) 90% of the tax shown on the return for the tax year or (2) 100% of the tax shown on the taxpayer’s return for the preceding tax year (110% if the individual’s adjusted gross income on the previous year’s return exceeded $150,000). Sec. 6654(a) imposes an addition to tax for failure to make a sufficient and timely payment of estimated income tax. The IRS, however, is entitled to waive the addition to tax in certain unusual circumstances if its imposition would be against equity and good conscience. Under Sec. 6654(d)(1)(B), the required annual income tax payment an individual taxpayer is required to make to avoid an underpayment penalty is the lesser of (1) 90% of the tax shown on the return for the tax year or (2) 100% of the tax shown on the taxpayer’s return for the preceding tax year (110% if the individual’s adjusted gross income on the previous year’s return exceeded $150,000). Sec. 6654(a) imposes an addition to tax for failure to make a sufficient and timely payment of estimated income tax. The IRS, however, is entitled to waive the addition to tax in certain unusual circumstances if its imposition would be against equity and good conscience.
Thank you, but I do not think this answers my question. I know that the underpayment penalty has been waived (according to Turbo Tax)....what I am asking is, why has it been waived?
The estimated penalty can be waived for many reasons. If you have not requested a waiver then it might have been waived based on the situation. There are exceptions to the penalty and situations where the penalty wouldn't apply, including: The total of your withholding and estimated quarterly tax payments was at least as much as your prior-year tax. You had no tax liability last year, and you were a U.S. citizen or resident alien for the whole year.