I owe $36 federal tax for the year. Why would I owe a prepayment penalty of $950? It's supposed to be if I owe over $1000. Turbo tax is automatically adding the fee.

[gmgrace]

I am unable to get answers without paying more money just for a question resolution.

[MindyB]

It's possible to owe an underpayment penalty if you don't withhold or pay enough tax on income received during each quarter. The $1,000 threshold refers to tax owed after subtracting withholding and refundable credits, not just the liability on the tax return.

If you'd like to reduce the penalty, you can visit the penalty section of TurboTax and enter the information in the interview to figure if an underpayment exception applies. To do this, navigate to Federal > Other Tax Situations > Additional Tax Payments > Underpayment Penalties > Start or Revisit

See also: Why am I getting an underpayment penalty if I'm getting a refund?