I made a one time Fed tax payment of $3,200 in Dec. 2025 because I knew I would owe taxes. Now it says I owe $262 Fed tax, and that includes $59 underpayment penalty!

[bporter]

My tax on income is $11,367 and I paid $11,164 in taxes in 2025. How could I have a penalty if I only owe $203?

[baldietax]

Estimated taxes need to be paid quarterly thru the year to avoid penalty, you can’t just pay it all at the end or no one would pay any tax til the last minute.  Even if you meet the “safe harbor” amount in total, a penalty may be assessed due to underpayment for earlier quarters.  IRS assumes your income is even thru the year, if this was not the case and it increased later in the year then you may be able to reduce the penalty by filing the Form 2210 Annualized Income method to show how the income came in later quarters .  You can work thru this in Other Tax Situations / Underpayment Penalties section (it’s extra work tho as you have to calculate an AGI per quarter).  See also Form 2210 instructions.

[bporter]

Me and my wife did take $19K IRA distributions each w/o fed withholding and I inherited a $20K IRA.  This should make it a special situation and maybe form 2210 would help.

[BillM223]

Inheriting an IRA is not a taxable event.

However, as you know, IRA distributions are a great way of creating lopsided income through the year.

As baldietax noted above, you may be able to reduce or eliminate your underpayment penalty by going through the Annualized income part of the 2210.

To do this, please go to Other Tax Situations->Underpayment penalties->Start and go through the somewhat long interview to identify if you are eligible for any exceptions to the underpayment penalty and to annualize your income for the 2210.