My wife is a federal employee with her Social Security Tax deferred via Notice 2020-65. TT keeps saying we need to pay back now with penalties. How do we handle in TT?

[Octoparrot]

We should not have a penalty if this is something the government forced on federal employees.

[BillM223]

What is the exact error message in TurboTax? And where do you see it, in the W-2 interview or in the Review?

It appears to me that if you have one employer, then the deferred Social Security tax will be added to your W-2, and that you should file the W-2 as is.

Please see this instructive post on this issue.

[Octoparrot]

No matter what I do, I keep getting an underpayment penalty. This should not be the case if this is a federal program to postpone SS taxes. “You have a penalty of $345 for underpayment of estimated taxes. Your federal refund was lowered and is now $512”. Even if I update Box 4 on the W2 to the correct amount of SS wages, TT still forces this underpayment penalty. I even tried using “Actual Withholding” – > Tax Payments by Quarter, Date of Payment, Penalty Waivers -> Late Payment Penalty -> Underpayment Penalty, which results in the same penalty.

[Octoparrot]

Also, when I did the Federal Review, TT does say we will be getting a W2c. TT wants us to pay the money back ASAP, but the federal employees are getting it taken out in 24 payments over 2021. We should not have to pay a penalty for this.

[fanfare]

if you switch to the CD/download version, you may be able to do an override, and then file a paper tax return.

if you already paid, customer support can help you switch.

Or, find another tax software provider that handles it correctly.

[Octoparrot]

Finally found the answer. TT had created a Form 2210 Underpayment Form, which is a bug. Unfortunately, the bug carried over on my returns as TT kept seeing this form. After getting the expert support, you have to dig into the Turbotax tools and manually delete the 2210 form. Log out and log back in.  Now even with the reduced SS tax, we don't have an underpayment. So much time spent on this bug.