2997479
I finalized my federal tax return today 4/2/2023, and have under payment, TurboxTax calculated my interest penalty is $xxx, about 3% rate, why so high? how it is calculated?
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There are underpayment penalties and then there is also interest charged on the penalty.
The Underpayment of Estimated Tax by Individuals Penalty applies to individuals, estates, and trusts if you don't pay enough estimated tax (quarterly) on your income or you pay it late. The penalty may apply even if you are owed a refund.
They calculate the penalty based on:
They charge interest on penalties. The date from which they begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest charged on penalties, see Interest
The law allows the IRS to waive the penalty if:
For more information, refer to Penalties and the Instructions for Form 2210.
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.
IRS form 2210
https://www.irs.gov/pub/irs-pdf/f2210.pdf
2210 Instructions
There are underpayment penalties and then there is also interest charged on the penalty.
The Underpayment of Estimated Tax by Individuals Penalty applies to individuals, estates, and trusts if you don't pay enough estimated tax (quarterly) on your income or you pay it late. The penalty may apply even if you are owed a refund.
They calculate the penalty based on:
They charge interest on penalties. The date from which they begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest charged on penalties, see Interest
The law allows the IRS to waive the penalty if:
For more information, refer to Penalties and the Instructions for Form 2210.
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.
IRS form 2210
https://www.irs.gov/pub/irs-pdf/f2210.pdf
2210 Instructions
Thanks everyone!
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