You are correct that when your AGI is over X amount, there is a 110% rule. However, is it possible that the penalty is calculated based on the dates of your estimated tax payments? Withholding is considered withheld timely through the year (even if you received a big bonus on 12/31 and got to the 110% that way). However, a penalty may still be calculated if you made estimated payments late and/or didn't make the minimum amount required per payment. The 2210 form should give you an idea if this is happening.
For example, if each of your quarterly required payments was $1,000, let's assume no credit carryforward. If you made $800 on the first payment and $1200 on the second, you would have an underpayment penalty of $200 for two months (the difference between the first payment date (4/15) and the second required payment date (6/15). As of 6/15, you are caught up, and the penalty calculation will cease. So this is possibly why a penalty is being computed. Again, remember withholding is applied evenly throughout the year, no matter "when" it was actually withheld.
I believe there was also another comment about annualizing your income. This is a pain, but it is worth it in certain situations. Let's say you sold a piece of land (so not a transaction that would have any federal/state withholding) for a $100,000 gain in December of the tax year. You clearly did NOT make an estimated payment for the sale of that land because you didn't know it would happen. "Assuming" you don't eliminate an underpayment penalty based on the prior (100% or 110% rule) or the current year 90% rule in its simple calculation, you would break your income and deductions down into sections based on "when it was earned" and determine your penalty (or eliminate the penalty). This is useful because if you sold your land in December, you would have only been required to remit payment with the 4th quarter January 15th payment. By annualizing, you have let the government know that you didn't earn this income until December, thereby not having the underpayment penalty calculated based on the assumption that income was earned evenly through the year. If this is applicable, be careful to verify the dates required to separate your income. I can't recall them off the top of my head, but it is NOT the standard quarterly assumption.
So, these are potential reasons why you have a penalty calculating and how you may be able to remove the penalty if you fall into an annualization issue, or if perhaps you can see if the penalty is correct based on evenly required payments without annualization consideration.
Hopefully, this will not be too confusing and will help.
