Feedback Regarding 2025 Estimated Tax Penalty Calculation

[rib123]

I recently filed my 2025 federal return using TurboTax and paid the amount calculated by the software, including an estimated tax penalty.

I later received IRS Notice CP30A stating that the IRS recalculated the estimated tax penalty and reduced it, resulting in an additional refund of $184.

I understand that estimated tax penalty calculations can sometimes differ depending on IRS computation methods. However, I wanted to provide feedback because I relied on the TurboTax calculation in determining my payment amount, and the IRS ultimately determined the penalty was lower.

I would appreciate any clarification regarding why TurboTax’s calculation may have differed from the IRS computation in this situation.

Thank you.

[VolvoGirl]

The underpayment penalty amount Turbo Tax calculates on your 1040 or state is only an estimate.  Turbo Tax can not figure it accurately because they don't know exactly when the IRS or state will get your return and tax due payment.  And Turbo Tax doesn’t know when you received the income.  The income needs to be broken out by quarter.    It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

If Turbo Tax calculates a penalty on 1040 line 38…..You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[rib123]

Thanks for the prompt reply. The reply surprised me, as I had never had a calculation issue for 20+ issues with an accountant. For the 2025 tax report, I used TruboTax for the first time. If the explanation is correct, TurboTax has exhausted the IRS's resources when its calculation is just a good guess while advertising 100% accuracy.

[baldietax]

Turbotax uses Form 2210 but IRS uses its own records for the inputs to the safe harbor and penalty calculation.  If there is any difference in the data, e.g. 2024 tax info, timing of estimated/final tax payments vs. what was input into Turbotax, then IRS may get a different result.

If you used Turbotax for the first time in 2025, did you go through the underpayment section in Other Tax Situations / Underpayment Penalties which includes confirmation of 2024 tax/AGI used on Form 2210.

You can check your transcript/payment history on your account at irs.gov to see if anything would account for the difference.  If you are using desktop you can see the Form 2210 in Forms mode, it's not filed unless you have one of the exceptions, AI method etc.

[rib123]

Thanks for the clarification.

I have questions.

I did another tax report for my 28-year-old son at a medical school. TurboTax calculated his federal tax return to be about $1,000, but the IRS returned about $125.

Both tax reports with TurboTax for my son and me were adjusted by the IRS. 

If I do 2026 tax reports with TurboTax, will the amended amounts be automatically reflected? Or, is there anything for me to pay attention to? Can I expect a higher probability of no corrections by the IRS?

[VolvoGirl]

Did you amend or do anything in your original return to match what the IRS changed?   What did they change?   Unless you changed your return then the original return will transfer into 2026 next year.   It might not affect your 2026 return or next year you can manually enter or edit any info that changed.   

Did you use the Online version or the Desktop download program?   

[rib123]

TurboTax estimated I owed $8,199, but the IRS sent a $184 check when I overpaid per TurboTax's estimation.  Also, TurboTax estimated my son would get $1,000, but the IRS returned him only $125. I didn't amend the reports calculated by TurboTax. The IRS recalculated mine and my son's and adjusted both. For this case, do I manually need to reflect the adjustments if I do 2026 tax reports with TurboTax? Thanks in advance!

[VolvoGirl]

Well changing the estimated penalty on 1040 line 38 won’t affect your return next year.   But you need to know why they changed your son’s return from $1,000 to only 125.   

[rib123]

Can you advise how to get the reason? After completing the e-file via TurboTax's estimation $1,000, only $125 was deposited.

[RachelW33]

The IRS should send your son a letter detailing exactly why they changed the refund amount.  

Another possibility for the refund difference is if there was a garnishment for back taxes, student loans, or child support.  Your son can check with the Treasury Offset Program at 1-800-304-3107.

For more information, please see: Federal Guidelines for Garnishment

[rib123]

According to him, he didn't get anything from the IRS about the reduction. Simply, TurboTax estimated the federal return to be $1,000 but the IRS returned only $128.54. Is there a way to find out about the reduction? If my son created an account at the IRS, can he access the reason? If he does the 2026 tax report with TruboTax, does he need to manually correct the 2025 refund? It's so stressful. 

[VolvoGirl]

He should be getting a IRS letter saying why in a couple weeks to the address on the return.   Keep waiting.   I don’t think you ever said if you are using the Online web version or the Desktop download installed program.   If you used Online did you set up a new account for your son with a different email address?

And you are looking at the refund on IRS 1040 line 35a?  And not just the federal and state combined total Turbo Tax gives you at the end when you file?  

[rib123]

The tax report was submitted mid Feb., and the return was received at the end of Feb. Since then, my son hasn't received any letter from the IRS. I used the Desktop download and installed the program.   

I looked at the refund of $1,000 on IRS 1040 line 35a.  TurboTax estimated a Federal Refund of $1,000 and a NY Refund of $63.