Form 2210 Underpayment Penalty

[freddytax]

When I calculate my taxes I'm told that there is no underpayment penalty yet form 2210 shows up and says that I do.  I had a home sale late in the year so estimated taxes to account for the home sale could not be anticipated, i.e., estimated.  I can check box A in part II on 2210 to waive the entire penalty but then I'm told that I cannot eFile.  Should I simply not file the 2210?

[freddytax]

Actually, I had TWO late in the year sales. 1) the home sale and 2) a large stock sale.  I paid my taxes throughout the year concerning my income from my employment.  The tax software does not know this.

[freddytax]

The tax software does ask for the sales dates for both the home and the stock.  Is the software smart enough to see that those sales were late in the year (and therefore not expect estimated tax payments throughout the year)?  That would be VERY clever!! 🙂

[freddytax]

Is it better to check box C in part II of 2210?  This more accurately describes my income for 2023.

[JohnB5677]

You've included a lot of information.  

The bottom line is YES you should check the box in Part II Box C of the 2210.

Now, you have to go back to your tax return.

Log into TurboTax

1.  On the main menu go to Tax Tools
2. Then elect Tools
3. There will be 4 green boxes
4. Select Topics Search
5. Type Annualize Income
6. Continue through the questions 
7. Be sure to reed them carefully.
8. Towards the end you will see Conclusion.
9. Do not check the box saying Do not use the annualized income method
10. The last page will confirm that your 2210 and Schedule AI will be printed with your tax return.

Please contact us again with any additional questions or to provide some additional details.

[freddytax]

Will AI line 10 populate itself?  I can see the IRS saying, sure, you paid us for first half of the year but then you made all this money the last six months of the year with no withholding.  I guess the question is, will the IRS still figure out a penalty?

[freddytax]

Thanks, John!  Turbotax did a great job guiding me through the AI for the 2210.  Funny, I wasn't that far off doing my own quick-and-dirty method = here's what I made each quarter, here's what I owed, here's what I paid and then the penalty calculation.  I was off by $75.  But calculating the penalty myself will save me $135 - if the IRS agrees with the math!