The IRS requires taxpayers to pay as you go. So even if you are having taxes withheld from your wages, if they are not enough to cover your tax liability at the end of the year, you can receive a penalty. The under withholding happens most often if you are married and there are two incomes or if you had two jobs or a raise. The best thing to do is to adjust your W-4 to have an additional amount withheld or tell them that you have more than one job.
It is possibly that you will qualify for an exception to the penalty if:
- Your filed tax return shows you owe less than $1,000 or
- You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%
To see if you qualify for the underpayment penalty exception, you can either select yes, when TurboTax asks you if you want to see if you can avoid the penalty or you can go to Other Tax Situations>>Underpayment Penalties. if you do qualify, TurboTax will attach form 2210 to your return and the penalty will be dropped off.
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