Penalty for not withholding enough tax all year

[DoninGA]

Go to this IRS website for the underpayment penalty - https://www.irs.gov/taxtopics/tc306

To annualize your tax payments to reduce or eliminate the underpayment penalty - 

Click on Federal on the left side of the online program screen

Click on Other Tax Situations

Scroll down to Additional Tax Payments

On Underpayment Penalties, click on the start button

[Godwin]

Thanks for the quick reply. 

Last year, i did receive the refund and nothing due from my side.

So wondering why still got this penalty.

[AmyC]

It is possible to get a refund and still have a penalty. See here. Learn more about penalties and when they are charged here. If you would like to reply with more information, we can better answer your concern.

[Godwin]

Sorry i'm not following.

Is it company's mistake?

[BillM223]

Probably not the company's mistake. The company is responsible for withholding the amount that you indicate on your W-4. However, it is up to you to tell your company to withhold an adequate amount for your return.

The US tax system is a pay-as-you-go system, so not only do you have to pay tax on your income, but you also have to pay it on a schedule through the year (i.e., you not can't wait until the end of the year to pay your tax).

But as Amy says, we don't have enough information to fully answer your question. Can you tell us things like what your total tax is and when you paid it during the year (i.e., did you withhold your taxes on your W-2, or make estimated tax payments through the year)?

[Godwin]

Thanks Bill for the detailed information. In My case, used W4 to withhold my taxes and in the entire 10 years of filing in turbotax, this is the 1st time i'm seeing this.

[Vanessa A]

Have you gone back through and double and triple checked your entries on your W-2.  If nothing has changed, it could be an entry error.  You can also compare your last years W-2 to this years W-2, to see if there is a drastic difference.

If for some reason, you did have too little withheld this  year, then you can possibly get the penalty waived. As you continue through your return, if you have a penalty, it will ask if you would like to see if you can avoid the penalty?  Select yes, then it will ask you what your tax liability was last year and a few other questions.  If you paid at least 90% of your 2023 taxes or 100% of your 2022 taxes, then you would not be subject to a penalty.  If you already answered this question, then it is possibly that you are still seeing the penalty because the form has not been updated yet for 2023.  It is expected to be released on January 24th. You may want to log back in on the 24th and then go back and answer the penalty questions. 

To do this, select the following:

• Other Tax Situations
• Show more next to Additional Tax Payments
• Start next to Underpayment penalties
• Walk through and answer the questions

[Godwin]

Excellent. Thank you very much for all quick replies. Will get back on Jan 25th and resume the submission.