Does TurboTax desktop automatically include interest owed in the federal and state "tax due" calculation?

[adamhurwitz]

I filed on-time federal and state extensions. Since then I've discovered I need to make additional tax payments as the federal and state "tax due" has updated while working on my taxes with TurboTax desktop.

Does TurboTax desktop automatically include interested in these estimates or do I need to manually calculate the added interest before making additional federal and state payments?

Much appreciated!

[DoninGA · Accepted solution]

TurboTax does Not calculate any penalties or interest on taxes owed.  There is no need for you to do so since the IRS will send you a bill for any penalty or interest after they receive the tax payment and the tax return.

[adamhurwitz]

TurboTax calculates and includes any underpayment penalties in the shown "Federal Tax Due": "The balance due on your return includes this penalty." I believe to @DoninGA's point above this does not include failure to pay penalties. The penalties in the screenshot below only covers the category of failure to pay proper estimated tax.

See TurboTax desktop > "Personal" tab > "Other Tax Situations" > "Additional Tax Payments" section > "Underpayment penalties"

[adamhurwitz]

It seems like it could be a good idea to estimate and pay the federal and state interest and penalties even if it means overpaying to attempt to avoid any future interest and penalties.

[VolvoGirl]

Add more to your payment (check or online).  Then let the IRS bill you for more or send you a refund. The extra interest and penalties stop they get your payment.  Its common and expected to let the IRS bill you for any more.

[An2425]

Does anyone know when the interest payments are calculated from?  From the time you file (ie the date you mail it in), or when they receive and work on it?  

also, if you filed your original return on time, do you get a penalty?  Or just the 5% interest for the additional amount? 

another question - can you pay your amended amount due before you actually file it?  Would that make it so that interest wouldn’t be do?  Or do they just care about the date you file the amendment? 

[MonikaK1]

Interest generally accrues on the unpaid balance of your tax starting from the due date of the tax return. An extension to file doesn't extend the time payment is due. If the return in question was for tax year 2023, interest has been accruing since April 15, 2024.

By filing your return on time, including extensions, you can avoid the penalty for late filing. Filing timely does not stop interest from accruing on any unpaid balance. In addition to interest, you may also be liable for a late payment penalty, which is .5% per month on the unpaid balance. See here for more information about the late payment penalty.

The interest rate for unpaid taxes is subject to change quarterly. You would owe interest at the prevailing rate for each quarter in which you have a balance due. See here for the interest rates.

You can make a payment toward your estimated tax due at any time. Interest will stop accruing on the amount paid as of the date it was received. The easiest way to make payments is on the IRS website at Make a Payment. Make sure you are applying the payment to the correct year.

@An2425