Covered total 2017 taxes with estimated payments in 2018 - thought this absolved me from underpayment penalties but TT states I owe a penalty for not increasing 1040ES.

[Zbucklyo · Accepted solution]

Two possibilities.  First, if your income was over $150,000 (or $75,000 if married filing separately), the safe harbor is 110% of the prior year tax, not 100%.  Second, if you are paying some of your liability with estimated taxes, the calculation is done on a quarterly basis (withholding is assumed to be paid equally throughout the year).  If you didn't pay enough in early quarters, paying everything later will not cure the underpayment deficit from earlier quarters.

If your income is not received roughly evenly throughout the year, you can see if you can avoid an underpayment penalty by using the annualized income method, Form 2200AI.  Or you can have the IRS calculate the penalty if you don't believe the TurboTax calculations.

[pwinters]

The IRS requires that you withhold at least 90% of your tax liability for the current year, regardless of what was paid in the previous year. There is a current IRS waiver for 2018 taxes - only 85% of tax liability needs to be withheld to avoid penalty.