Form 2210 did not generate but TurboTax software calculated an underpayment penalty

[Daniel_K]

That answers my questions - thanks @MikeF2 and @metrangia!

[raghu2600]

IRS has sent me a refund check stating "We reviewed your Form 1040 for the tax year ending 2023 and found that you miscalculated your estimated tax penalty".  I received a 1099 for a gig job that I performed in October 2023, and TurboTax miscalculated penalty for this payment.  There was no Form 2210 in the printed forms, so I thought Turbo Tax calculated the penalty behind the scenes. After reading here, I realized that you have to click Open Form in desktop edition and manually search 2210. Not sure why TurboTax would do this way. First of all, TurboTax miscalculated the estimated tax penalty and second they hid 2210 from printed forms. 

[MikeF2]

When you filed your return with TurboTax did you specifically give the date you received the income from the gib job? Because you would've owed estimated tax for the one quarter (4th quarter). Otherwise, i think TurboTax will say you received it across all four quarters by default. And check the messages on this thread. On Form 2210, it says not to send in the form unless you wish to request a waiver. But i am sorta surprised the IRS responded as fast as they did with a refund no less. 

[raghu2600]

I entered it as a 1099-NEC income. I don't think TurboTax has asked me a date or dates of when this gig job was performed. My understanding of Estimated Payments is that based on current year's income, you should estimate next year's estimated tax. This particular 1099 job was a one time job that I performed and was not estimated in 2022.  You are right, TurboTax has calculated across all 4 quarters and that's why IRS corrected it and sent me a refund of penalty. 

[MikeF2]

"My understanding of Estimated Payments is that based on current year's income, you should estimate next year's estimated tax. "

Yes, sorta i guess. I think that applies to people who use the "safe-harbor rule" which i do. Personally, i estimate my tax liability for the whole year (2024 in this case) as same as my tax liability for the previous year (2023) and divide it by two and send the IRS the payments in Quarters 1 and 2 of 2024. So i front-load the payments, to be safe, because it matters when you pay your estimated tax. But the safe-harbor rule doesn't work for everyone. It sounds like you just had a job pop up in October 2023 and got paid then.  The IRS knew about it because they saw your 1099 but the Turbotax program needs to be told when you earned the extra income otherwise it'll default to all four quarters. You would've been OK if you made an estimated tax payment (1040-ES) for the 4th quarter (i think it would've been due Jan 15, 2024) because you had earned it in the 4th quarter. If you had earned it in the 1st quarter of 2023, the Turbotax program would've been right to penalize for all 4 quarters. 

[MikeF2]

Let me add to search on "safe harbor rule as it applies to estimated taxes" on the internet. They can explain it better than i can. 

[raghu2600]

Thanks @MikeF2 

[DawnC]

Did you mark the mark to Let the IRS bill me?   When you select that option, the IRS sends you a bill.   If you pay the penalty within the date on the notice, no interest is charged.   See Form 2210 instructions.    @raghu2600