Form 2210 Penalty - even though I paid (W/h + estimates) more than 90% of current year tax

[CDRogers77]

TurboTax, via Form 2210, is saying that I owe an underpayment penalty even though I paid (via a combination of withholding and estimated taxes) more than 90% of the current-year tax liability.

This is inconsistent with IRS requirements, which clearly state that an underpayment penalty is not assessed if 90% or more of the current-year tax liability has been paid.

Please advise how to proceed.

[MonikaK1]

If TurboTax is showing an underpayment penalty on your return, visit or revisit the Underpayment Penalty section under Other Tax Situations and answer the interview questions. The penalty calculation may change based on your answers, including information about when your withholding was applied. In addition, if you believe you qualify for a waiver of the penalty, you can request a waiver in that section.

Paying all of your tax prior to the due date of the tax return will ensure that you avoid interest for late payment. However, depending on when you made your tax payments, you could still be subject to the underpayment of estimated tax penalty (Form 2210).

The IRS may reduce an underpayment penalty if any of the following apply:

• You or your spouse (if you file a joint return) retired in the past 2 years after reaching age 62 or became disabled and you had reasonable cause to underpay or pay your estimated tax late. See Waiver of Penalty in Instructions for Form 2210PDF.
• You had most of your income tax withheld early in the year instead of spreading it equally through the year. 
• Your income varies during the year. Complete Form 2210, Schedule AI, Annualized Income Installment Method PDF(found within the form).

The penalty for underpayment of estimated tax can also be removed to the extent that the underpayment is the result of a casualty, local disaster, or other unusual circumstance such that it would not be fair to impose the penalty.

See this TurboTax tips article for more information about Form 2210.

[Mike9241]

there are other rules that go with the 90% rule

1) withholding is deemed to be 1/4 of the annual total for each tax period. You do have the option of using actual for each period

2) most importantly estimates only count for the period in which mad and subsequent periods,

the default method 

say your tax was $2000

withholding was $1000

and you paid an estimate of $1000 on 5/15/2024

90% of your tax for each period would be $450 (2000/4*.9)

withholding for each period would be $250 (1000/4)

since the estimate was not paid until the second period you have a $200 underpayment for the first period

you do have the option of completing the Annual Income Installment method on page 3 of the 2210 to see if that lowers your pnalty