how many people have been charged an "underpayment penalty" who are salaried employees who have been consistently employed with no major changes to employment

[sswearin]

How can you be hit with an underpayment penalty when nothing changed on your W4 since last year (owed $34 last year), salary (2% increase) and employment status didn't change... what the hell am I missing? Been trying to get anyone at the IRS to answer that one. I didn't hit a major bracket break...

[SharonD007]

The federal tax system is a pay as you go system.  As you make money, you have to pay taxes on that money. You may have an underpayment penalty if you didn't have enough taxes withheld from your income throughout the year on your W-2 or if you're self-employed and you didn't pay enough estimated taxes.

To try to reduce or eliminate it, review the TurboTax article Why am I getting an underpayment penalty?

For more information, refer to the TurboTax help article Guide to IRS Tax Penalties: How to Avoid or Reduce Them for tips to use in the future.

You can contact the IRS to request a one-time abatement of your underpayment penalty. For individual tax returns, call 1-800-829-1040, 7 AM - 7 PM Monday through Friday local time.

[sswearin]

Yeah, that's not what I asked.  I know what it is. My state employer always does my withholding which was just fine last year, and resulted in me owing a bit (under $200). I received a 2% increase halfway through the year, no major life changes - no household changes, no new car/house... nothing.

Now I am hit with a "underpayment penalty"?

I want to know how many other people have seemingly been hit with a penalty when their circumstances have not changed or changed seemingly little - especially when they are salaried employees. I am not a small business owner or self-employed. It seems if I am using the withholding calculator, and everything is steady - I should come out right in the end.  I am wanting to see if ANYONE ELSE had my experience.

[ThomasM125]

I have not noticed other posts similar to yours where there is a questionable underpayment of tax penalty. Even if you don't owe significant taxes when you file your return, you can be subject to an underpayment of tax penalty, as it is based in part on when you pay your taxes during the year.  

You can work through the Underpayment penalties section of TurboTax, which is in Other Tax Situations section to see if you can eliminate your penalty based on the timing of the receipt of your income and tax payments. You can indicate that you want to enter a state tax return or that you want to amend your tax return in TurboTax to get back into the program.

Also, the IRS would likely refund the penalty if they determined it was not owed when they process your tax return.

[baldietax]

to avoid penalty you need to have paid thru withholding or timely quarterly estimated taxes, either 100% of your 2023 tax liability, or 90% of your 2024 tax, whichever is smaller - the 'safe harbor' amount.  See estimated tax FAQ for more info https://www.irs.gov/faqs/estimated-tax or the instructions for Form 2210.

If you are getting an underpayment penalty in 2024 then something may have changed just enough to miss the safe harbor.  So I suggest to figure what the 'safe harbor' amount was for your situation in 2024 and see if withholding and estimated taxes were enough and that will likely explain the penalty.

If you are on TT desktop go to Forms, double click on the penalty on the 1040 then double click again on the worksheet and it will bring up Form 2210 which does this calculation.  Not sure equivalent with TT Online but either way this form should also be in the PDF with all forms/worksheets.

You may also need to adjust withholding for 2025, you can work thru this under Other Tax Situations / Form W4 and Estimated Taxes.

[SteamTrain]

@sswearin 

And...you didn't say if you did this..

.......but if you paid any quarterly estimated taxes during the year....especially if you just paid the last quarter or two of Estimates??

...that can easily result in a penalty unless you go thru the form 2210/2210AI, Annualized Income Form preparations....even if you've overpaid by thousands with the last quarterly estimated taxes.