Form 2210 Penalty

[TheWisdom]

I don't think I owe any taxes. Where is this coming from? I need help from experts.

This is the first time I've seen it.

[Vanessa A]

It says you owe $1,847.  Your tax liability is $2,336 and you only paid in $553.  You are getting a penalty because you didn't pay the full amount you owed for the year.  If you only had a tax liability of $553 for 2021, then you can claim a penalty waiver by continuing through and answering yes when TurboTax asks if you would like to see if you can get the penalty waived.  It will then ask what your liability was for 2021 as well as your 2021 income.  If you paid 100% of your 2021 liability, the penalty will be removed.  You can also see if you qualify to annualize your income on the same form which means if you received most of your income in the last quarters of the year, you would be able to lower your penalty. Otherwise, you will likely be charged the full $64. 

[TheWisdom]

Excuse me! But you might be missing something here; the $64 penalty is from the 2022 tax year, NOT 2021.

This could be a bug (error) in the TurboTax software.

[JulieS]

Yes, this penalty is for 2022, but Form 2210 uses two methods to determine the minimum amount you must pay.

To avoid the penalty you must pay in  90% of your current year tax (2022) ,or 100% of the total tax from the prior year (2021), whichever is less. 

If you owe more than $1000 when you file your return and you have not paid  in 90% of your current year tax (2022), or 100% of the total tax from the prior year (2021), you will owe a penalty for failing to pay enough tax through withholding or estimated payments. 

[TheWisdom]

I paid 100% of the total tax from the prior year (2021), and I am going to pay 100% (I have not filed for 2022 yet) of my current year tax (2022). So in my case, where does this penalty come from? Let's talk accurately about my case, experts; we do not need more theory.

[RobertB4444]

In your example the tax for 2021 was $1965 after credits were applied.  So in order to avoid penalties in 2022 you would have needed to pay in at least $1965.  You paid in $553 so TurboTax is calculating your estimated tax penalty at $64 on the $1412 that you did not pay in.

@TheWisdom 

[TheWisdom]

The tax for 2021 was $1965 and I paid $2258 (overpayment). Then I received the 2021 refund: $293. Therefore, it does not make sense that I owe any 2021 tax bill. Does it?

[DianeW777]

It depends.  The IRS system is a 'pay as you go' system.  This means that they want the tax when you earn the income.  If you didn't make your estimated tax payments evenly throughout the year then a penalty can and will be calculated for underpayment.

For example, if you made your estimated tax payment at the end of the year then there would be an underpayment penalty for the first three quarters of the year, even if you did receive a refund.

[TheWisdom]

This is Form 2210 along with its accompanying worksheet. If there is an unpaid tax bill, where is the IRS letter or any invoice that should have arrived in my mailbox? I have not received any bills or invoices last year. As I know, this worksheet is calculated and determined by the TurboTax software itself, not by the IRS (I've checked my IRS account).

This is 1040 Individual tax returns, not business tax returns. The 1040 Individual is filed annually. It doesn't make sense to calculate, estimate, or penalize taxes on a quarterly basis in this context.

You can see it in my IRS account here; I owe nothing.

Please help me take a look to see if something is wrong with them. 

[JamesG1]

The forms that you are showing are calculating an underpayment penalty for your 2022 Federal 1040 tax return.

Your 2022 Federal 1040 tax return computed tax of $2,336 and tax withheld of $553 leaving a balance due of $1,783.

IRS form 2210 Underpayment of Estimated Tax by Individuals, Estates and Trusts calculates the underpayment penalty if you did not withhold or pay enough taxes during the tax year.

In general, you may owe the penalty for 2022 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of:

1. 90% of your 2022 tax, or

2. 100% of your 2021 tax.

Access the form by following these steps:

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Other Tax Situations.
• Scroll down to Additional Tax Payments.  Click Show more to the right.
• Click Start to the right of Underpayment Penalties.

@TheWisdom 

[TheWisdom]

In the TurboTax software's penalty waiver form, what information should I provide (What do I need to write down) if I want to request a waiver of this penalty?

[DianeW777]

It depends. There are certain exceptions to the penalty. If you don't meet one of them it's very unlikely that a penalty will be waived for underpayment. Based on your personal situation you can try to explain why your payments were late, I wouldn't discourage it but be prepared that it may be denied.

Here are the exceptions to the penalty (Form 2210 Instructions:(  Who Must Pay the Underpayment Penalty

Exceptions to the Penalty: You won't have to pay the penalty or file this form if either of the following applies.

1. You had no tax liability for 2021, you were a U.S. citizen or resident alien for the entire year (or an estate of a domestic decedent or a domestic trust), and your 2021 tax return was (or would have been had you been required to file) for a full 12 months.
2. The total tax shown on your 2022 return minus the amount of tax you paid through withholding is less than $1,000. To determine whether the total tax is less than $1,000, complete Part I, lines 1 through 7.
   1. What is Form 2210?

[TheWisdom]

Could you please inform me how I can avoid this issue for next year's tax returns (2023)?

[AmyC]

Pay more into the system. You can do that using either method:

• have more withheld by payors than currently
• make estimated payments each quarter

If you choose to make estimated payments, the program can help or you can use IRS worksheets.

• Can TurboTax calculate next year's federal estimated taxes?
• Can TurboTax calculate the estimated payments for next year's state taxes?
• IRS  Form 1040-ES, Estimated Tax for Individuals 

[fanfare]

Form 2210 requires evenly spread Estimated tax.

What is your 2022 tax ?
If you pay each period 25 % of that amount ( x 1.10 if your AGI is over 150,000)
you can avoid an underpayment of estimated tax penalty in 2023 regardless of income.

This is the prior year's tax rule for estimated tax.

April 15 is the 1st ES payment due date, not April 18.

--

update: The Internal Revenue Service today reminded people that Tax Day, April 18, is also the deadline for first quarter estimated tax payments for tax year 2023.

@TheWisdom