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tgmoody1
New Member

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

My amount of taxes paid was higher than the amount due, and I am expecting a refund. TurboTax is not allowing me to finish submitting my return without filling out my prior year tax liability on an AR2210 form Penalty for Underpayment of Estimated Tax
5 Replies
gloriah5200
Expert Alumni

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

Yes, the software is trying to calculate whether or not you will owe an underpayment penalty on the AR tax return by comparing your current year AR tax liability against the prior year tax liability.

 

Changes made to the AR withholding rates during 2020 actually caused AR taxpayers to have less withholding taken out of their income resources during the year vs prior years (like W2's, 1099R's, etc.). TurboTax is asking for your prior year tax liability in order to try to exclude or reduce any underpayment penalty calculated on your return.

 

In order to avoid the AR underpayment penalty, you must meet ONE of the following requirements whether or not there is a balance due on the AR return:

  1. Your current year withholding must equal at least 90% of the current year AR state tax liability, or
  2. Your current year withholding must equal at least 100% of the previous year tax liability

TurboTax must have the amount of the prior year tax liability provided in order to make the comparison for your correct and accurate tax return and complete the AR form so that the state will not later calculate the underpayment penalty if qualified not to owe it.

 

AR Estimated Tax Payment Guidelines 

 

 

 

jarrod6424
Level 1

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

@gloriah5200 where can I find my prior year tax liability? I've been using turbotax deluxe for 15 years and I've never seen this.

Cynthiad66
Employee Tax Expert

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

Your liability for penalty computation purposes is the amount you owed on the prior year return.  This is a part of the computation when determining the amount of Underpayment penalty.  If you did not owe in 2019 you can ask that the penalty be waived.  They base that decision on your history.  Did you owe State taxes for 2019?  How much?  That is your liability.

 

In order to avoid the AR underpayment penalty, you must meet ONE of the following requirements whether or not there is a balance due on the AR return:

  1. Your current year withholding must equal at least 90% of the current year AR state tax liability, or
  2. Your current year withholding must equal at least 100% of the previous year tax liability.
jarrod6424
Level 1

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

@Cynthiad66 I received a state and federal refund in 2019, I’ve never owed taxes on state or federal...ever. After some quick research I was starting to think tax liability is the amount I was taxed in 2019, but after reading your post it sounds like tax liability might be the amount I owed in state taxes after doing my taxes...which doesn’t make sense since I got a refund. Can you clarify?

JamesG1
Employee Tax Expert

If I did not underpay my state taxes last year, why must I fill out my previous year net tax on a Penalty for Underpayment of Estimated Tax form?

Tax liability, in this instance, is the amount that you owed in Arkansas state taxes.

 

That amount would be found on line 33 of the 2019 Arkansas Individual Income Tax Return.

 

In order to avoid the Arkansas underpayment penalty, you must meet ONE of the following requirements regardless of whether there is a balance due on the AR return:

  1. Your current year withholding must equal at least 90% of the current year Arkansas state tax liability, or
  2. Your current year withholding must equal at least 100% of the previous year tax liability.
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