Is there any way to force Form 2210 to enter annualized income to avoid a penalty for uneven estimated tax payments?

[al997]

The IRS charges a penalty if I have uneven estimated tax payments even if I am getting a refund. My income can vary significantly from year to year and quarter to quarter so I always have to file Form 2210 to show that I overpaid taxes at each quarter. The IRS doesn't care that TurboTax says there is no penalty. The first time this happened, I needed to download the desktop version to file an amended return. The next year I entered false info to trigger Form 2210 then had to go back and undo the false info needed to trigger the form. Where is the check box to trigger the form?

[baldietax]

you have to work through this method in Other Tax Situations / Underpayment Penalties and provide all the necessary quarterly info to generate Form 2210AI.  At the end you will be asked whether you want to adopt it.

[al997]

I have no problem getting into the loop where TurboTax says "based on your answers you don't have a penalty" and asks me if I want to repeat that loop. The problem is that TurboTax only checks for estimated tax payments meeting the 90% of current tax liability and 110% of the previous years tax liability. It does not take into consideration that my estimated quarterly tax payments are based on quarterly income and that I have an extra tax payment between quarters for a one time unexpected income event. TurboTax does not test for this in form 2210 instructions: "The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment. This is true even if you’re due a refund when you file your tax return. However, you may be able to reduce or eliminate the penalty by using the annualized income installment method." I can pay over 100% of current tax due and over 110% of previous years liability, and be overpaid at each quarter, but I can't prove that I have overpaid at each quarter without filling in form 2210 and TurboTax doesn't give me that opportunity unless I zero out estimated payments. Then when I go back in to fix the estimated payments, it removes the form 2210.

[baldietax]

Turbotax follows Form 2210 to calculate the underpayment and takes multiple payments per quarter into account in determining quarterly under/overpayment, it doesn't just check totals, you shouldn't be having to workaround it with AI method every year if your ES payments are timely enough to be overpaid every quarter.

If the ES data doesn't match what IRS knows or there is some other adjustment to your return by IRS that may trigger an underpayment penalty that Turbotax couldn't calculate, but that should have been a one-off issue.

On desktop you can bring up Form 2210 to see the calculations in Forms mode... but sounds like you are using Online - I'm not sure the equivalent for Online to see 2210 if it's not in the PDF with all forms and worksheets by default or whether there is a simple switch to see it or trigger AI method even if you don't have a penalty by default (I suppose you could adjust ES payment for Q4 just enough to trigger a small penalty then select one of the waivers or option to treat the withholding as paid, that would trigger 2210 into your return - just to confirm Turbotax is correctly calculating the under/overpayment for earlier quarters without AI method).

[mminderbinder]

I have this same issue.  TurboTax is assuming the estimated taxes are equal for each period irrespective of the values that are actually paid.  I have posted a similar issue that has gone unanswered: Annualization of SC and the calculated penalty incorrect.

[DianeW777]

If you would like to send us a “diagnostic” file that has your “numbers” but not your personal information it would help.  If you would like to do this, here are the instructions:  (Don't forget to give us the state)

TurboTax Online:

Open your return -Go to the menu panel on the left side of your return and select Tax Tools. 

1. Then select Tools below Tax Tools.
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent.
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number.
5. Reply to this thread with your Token number and your state. This will allow us to open a copy of your return without seeing any personal information.

TurboTax Desktop:

If you like, you can send a copy of your return that will be scrubbed to eliminate your personal data by using these steps:

1. Click on Online in the top left menu of TurboTax Desktop for Windows
2. Select 'Send Tax File to Agent'* > Follow the prompts to reach the token number.
   • Enter your email used for TurboTax > Enter your code > Send
3. Write down or send an image of your token number and state then place in this issue.
4. We can then review your exact scenario for a solution.
5. Please also tell us any states included in the return. This is necessary for us to view the return.
   • *If using a MAC, go to the menu at the top of the screen, select Help, then, 'Send Tax File to Agent')

We will be able to see exactly what you are seeing and we can determine what exactly is going on in your return to provide you with a resolution.

@mminderbinder 

[al997 · Accepted solution]

Zero out estimated payments until TurboTax shows a penalty. Then go to the review for underpayment penalty and use the annualized income method to reduce penalty. Confirm using the annualized income method. Go back to the estimated payment section and put the correct numbers back in for all quarters and any extra payments. This should be done late in the process to prevent accidentally passing through the underpayment review section. If you accidentally pass through the underpayment review again TurboTax will remove form 2210 and you will need to fake it out again.

[mminderbinder]

Token 157949096-11000769..  South Carolina State return included.

There is no option to include the actual withholding without including additional payments.  For the SC split of the actual withholdings, the differences between that divided by 4 are the following:

4/15 - +2834

6/16 - (2125)

9/15 - (582)

1/15 - (127)

So because the initial 4/15 period had a higher payment during this period, it should reduce the penalty as there is a cumulative excess withholding compared to the required amount for the first few periods.

Thanks @DianeW777 

Mike

[mminderbinder]

Hi @al997 

I tried your way and the amount is still incorrectly calculated. - thanks for responding!

Mike

[DianeW777]

Thank you for your mock return. Based on the review of your South Carolina (SC) return, it appears the amounts on the screen 'Enter Required Annual Payment by Period' the entries were made automatically vs direct entry since the total equals the 'required' annual SC payment.

As far as the withholding portion, if I manually edit and change the amounts on the SC Underpayment Statement (estimated based on the numbers in your post) the penalty is reduced to less than half of the current penalty calculated on your return. 

As you indicated, in the Step-by-Step, there is not a question that allows you to enter the actual withholding by period, instead it uses the math of the combined total withholding for the year, for each period. 

If you are using TurboTax Online, you can switch to TurboTax Desktop.

• How to switch from TurboTax Online to TurboTax Desktop?

This takes place in 'Forms' mode instead of Step-by-Step. Once you make the change, in the left hand side, under Forms in My Return (scroll down to SC)  you can manually override the numbers on the 'Undpmnt Stmt', column 'Amount Paid' for each period to represent the actual withholding in each period. This will give the results noted in the second paragraph above.

• How do I override (replace) an amount calculated by TurboTax?

Keep all details related to this explaining why you needed to override the calculated figures.

@mminderbinder 

[mminderbinder]

Thanks @DianeW777 .  I am on the desktop version.  This confirms that TurboTax does not calculate the SC underpayment amount correctly for anyone who does not have the same withholding amounts for each of the payment periods, and there is no real option other than to go into the forms and override the values.  This affects every single SC user who is impacted by the underpayment amount.  This may create situations for all of these people where they may be charged more or less based on this inaccurate calculation.

[DianeW777]

Yes, I understand. It's more uncommon for most individuals to actually calculate the real numbers than to accept the automatic calculation.  I did report this experience and possibly it will be an update at some point.

Thank you again for providing a sample return for review.

@mminderbinder