How do I get rid of an Underpayment Penalty since I'm in a Federal Disaster Area (California) and wasn't required to pay estimates until October?

[QuiltLady1]

The default is 25% per quarter, but I was required to pay 75% by Octo 16, 2023.

[MonikaK1]

If you live in a federally declared disaster area, and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty. 

Visit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct.

See here for the IRS requirements for the California disasters for 2023.

If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.

To request a penalty waiver on your return, you can also enter the amount you want to be waived in parentheses on the dotted line next to line 19 (tax year 2023 form). Subtract this amount from your total penalty and enter the result on line 19.

Then, attach a statement to your tax return explaining why you were unable to make the required estimated payments. You may also need to attach documentation, such as proof of retirement, disability, illness, or damage to your home.

[dmertz]

Enter your the total of estimates paid by October 15, 2023 as having been paid on April 15, 2023.

[QuiltLady1]

Thank you. 

I also found that I can go to "Forms" view at the upper right of the screen and go to Form 2210 listed on the left.  Then I can check box A in Part II for a complete waiver of penalty.  Down in Part III, Section B, Line 19, I clicked on "Explain" and it brought up the "Explanation Statement," where I typed in my state and county, and that we are in a Federally Declared Disaster Area and therefore were not required to make any tax payments until October 16, 2023.  That should work, I think.

[gregbe2000]

I have the same issue.  I've been on chat with someone at TT for a while.  They haven't come up with a solution yet - not sure they know it's a bug.

[MonikaK1]

If you live in a federally declared disaster area and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty. 

Visit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct.

If you have taxes due with your return, and a penalty for underpayment of estimated taxes is calculated by TurboTax, it will ask whether you are covered by a disaster declaration, and you can request a waiver of the penalty.

See here for the IRS requirements for the California disasters for 2023.

If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.

Because the Federal and state extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations during specified dates, the deadlines themselves aren't updated in the software. The tax agencies made an administrative decision not to impose the penalties, but since the law itself didn't change, tax software including TurboTax still calculates the penalties. 

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

[QuiltLady1]

Yes, I would hope that they see the need to link a person's residence to one of the many Disaster Areas that were included in allowing the delay of tax payments and thereby avoid the Underpayment Penalty.  I have TT Deluxe, and I solved it by doing a manual override: 

I switched to "Forms" view in the upper right corner.  Then I found "Form 2210" on this list at the left (which is the form that generates the Underpayment Penalty).  On that form, in Part II, I checked Box A for "Waiver of the entire penalty."  Go down to Part III, Line 19, and click on "Explain"; it brings up the Statement Form, where I put where I reside, and that it's in a Disaster Area, and therefore I wasn't required to make payments until Oct 16, so no Underpayment Penalty is due.  You can then click on "Step by Step" in the upper right corner to go back to the normal information input method.  

I hope this helps, and, yes, they should have this built in.

[withcontra2]

dmertz, So this would be lying to Intuit Turbotax to avoid the penalty, but not lying to the IRS?

What if Form 2210, Underpayment of Estimated Tax ...  was generated.

[dmertz]

The suggestion by MonikaK1 is probably the better approach to make it explicit that the payments are not late due to the extended deadlines.

[skiptomylu]

From form 2210 instructions,

Federally declared disaster. Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Don't file Form 2210 if your underpayment was due to a federally declared disaster. If you still owe a penalty after the automatic waiver is applied, the IRS will send you a bill.

[MonikaK1]

If you have taxes due with your return, a penalty for underpayment of estimated taxes is calculated by TurboTax, and you paid estimated tax within the extended time period for California disasters:

Visit or revisit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct. Go through the interview and follow the prompts; when you get to the Penalty Waivers screen, answer "yes" if you qualify for a disaster exception, then "yes" at the next screen to request a waiver of the penalty, in all or part. Enter the reason in the field provided.

If you live in a federally declared disaster area and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty. 

See here for the IRS requirements for the California disasters for 2023.

If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.

Because the Federal and state extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations during specified dates, the deadlines themselves aren't updated in the software. The tax agencies made an administrative decision not to impose the penalties, but since the law itself didn't change, tax software including TurboTax still calculates the penalties. 

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

See here for related information from the California Franchise Tax Board.

[jmikimac]

Hello,

I live on Maui Island, a Federal Disaster Area due to the wildfires. I was ready to submit my taxes, and then I saw the deadline had been extended to August. How do I get the Underpayment Penalty to be waived?

Thanks J McGinnis

[QuiltLady1]

Hello.  This was my situation the previous year, but in California (2022 disaster, tax payments extended until October 2023, then dealing with the underpayment penalty in the spring of 2024). 

Since your return is complete, go ahead and file, but don't pay anything that's due until your Payment Extension Date, which in your case is August (unless they extend it again, which they did for California).  When you file in 2025 for the 2024 calendar year, Turbo Tax may calculate an underpayment penalty (it did for me).  At that time (spring of 2025, when you figure your 2024 taxes) you can request a Waiver of Penalty - some replies to my question about that said that the Request for Waiver is built in to Turbo Tax, but I didn't see it.  What I did, and you really don't need to worry about this until next spring, is that I went from Step-by-Step view to Forms view in the Turbo Tax program.  From there I went to form 2210 and manually checked the Waive all Penalties box and added the Statement that I was in a disaster area and wasn't required to pay the taxes until August (or whatever your final payment date becomes).  The IRS will know from your address that you don't owe the penalty, but this will get the Underpayment Penalty off of Turbo Tax's Form 1040.  

I don't know how the State of Hawaii is handling it; if they follow the Federal guidelines, as California does, you'll do the same thing for them.  If not, you'll need to do some quick research.

Hope this helps!

[AmyC]

You can file your taxes since they are done. The payment is not due until Oct 22,2024. Hawaii follows the federal so you also have time for your HI return. I am sorry for the experience you and Maui have been through.

Reference:

Updates for Taxpayers - Hawaii Department of Taxation

@jmikimac