HI
If 2022 Taxes Paid in between Payroll Withholdings ,1/15/2023 Q4 Estimate and 4/15/2023 Extension Payment amounted to greater than 110% of 2021 Tax Liability, how do I reflect in Turbotax that there should not be a calculation of Penalty or Interest on Form 2210. Additional information is that there still will be due an additional $45,000 of 2022 taxes that will be paid in when the Return if filed. If it is recommended to have this remaining tax balance due paid in prior to the final filing, please let me know.
Thank you
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If Turbo Tax gives you a penalty on line 38
You might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.
It's under
Federal or Personal (for Home & Business Desktop)
Other Tax Situations
Additional Tax Payments
Underpayment Penalties - Click the Start or update button
If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form. If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column. Type 2210 in the search box and open the 2210 form. Check box C to let the IRS calculate it.
The safe harbor rule doesn't include any payment made with the extension ... it only includes the 4 quarterly payments. And making an estimated balance due payment as soon as possible to mitigate the penalty is always a good idea.
First of all, while withholding is generally assumed to be paid equally throughout the year, quarterly estimated taxes must be paid equally throughout the year in order to avoid underpayment penalties. You mentioned you paid in 110% of prior year's total tax via withholding, 4th quarter ES and with your extension request. That means you underpaid at least for Quarters 1, 2 & 3, if not all four quarters.
Secondly, you said you still owe $45,000 when you file your tax return. Unless what you have paid in is at least 90% of your total 2022 tax liability, you will incur additional late payment penalties and interests. Extensions only extend the due date of the tax return, not the balance due the IRS. I suggest you file and pay your taxes ASAP to minimize the late payment penalties and interests. If you can't file your tax returns yet, go ahead and pay the $45,000 now. IRS webpay is the fastest and safest way to pay taxes. Go to www.irs.gov.
https://www.irs.gov/pub/irs-pdf/f4868.pdf
Late Payment Penalty
The late payment penalty is usually ½ of 1% of any tax (other than estimated tax) not paid by the regular due date of your return, which is April 18, 2023. It’s charged for each month or part of a month the tax is unpaid. The maximum penalty is 25%.
The late payment penalty won’t be charged if you can show reasonable cause for not paying on time. Attach a statement to your return fully explaining the reason. Don’t attach the statement to Form 4868.
You’re considered to have reasonable cause for the period covered by this automatic extension if both of the following requirements have been met.
1. At least 90% of the total tax on your 2022 return is paid on or before the regular due date of your return through withholding, estimated tax payments, or payments made with Form 4868.
2. The remaining balance is paid with your return.
If Turbo Tax gives you a penalty on line 38
You might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.
It's under
Federal or Personal (for Home & Business Desktop)
Other Tax Situations
Additional Tax Payments
Underpayment Penalties - Click the Start or update button
If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form. If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column. Type 2210 in the search box and open the 2210 form. Check box C to let the IRS calculate it.
Thank you for your guidance
Great Advice. Thank you!
Thank you for taking the time to respond to me.
your 2023 Form 2210 automatically applies one of the two rules whichever is better for you,
however, your estimated plus withholding each quarter must be at least 25% of the amount,
in other words, evenly spaced, to avoid penalty
Thank you
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