Penalty with quarterly estimated tax payment

[JohnB5677]

Please clarify your question.

• Did the quarterly payments cover your entire tax bill, or do you still owe?
• Were all of the payments made on time?
• Did you fulfill the safe harbor requirements below?
  • Is the amount you owe less than $1,000, after subtracting withholding and refundable credits?
  • Did you pay 90% of the tax that you owed for the current year?
  • Did you pay 100% of the previous year tax, (110% for higher incomes based on AGI)?
  • If your previous year's adjusted gross income was more than $150,000 you will have to pay in 110% of your previous year's taxes to satisfy the "safe-harbor" requirement.

Underpayment of Estimated Tax by Individuals Penalty

[jappaj2]

I've paid 4 estimated tax payment as scheduled in last year 2022 return per turbo tax calculation.

The issue is I did at IRA to Roth IRA conversion in securities (non cash) in mid October 23 without tax withholding.  I further calculated and submitted the extra tax withholding in Jan 24 (4th est. tax due date).

I finished the 2023 return this year and I've about a tax return about $1500 but line 38 of the 1040 show there's a $1100 estimated tax penalty.   Should I submit a 2210 to appeal the penalty or wait for the letter from IRS?  Please advise.

[DianeW777 · Accepted solution]

It is your choice, however the bill keeps going up while you wait and the IRS is anything but speedy these days. You do understand the system and because you had a large increase in income i the last quarter the annualized income method could be very beneficial in reducing your late payment penalties.

There is an annualized method available because you received this in the last quarter of the year.

• What is Form 2210?
• How do I add Form 2210 in TurboTax?

Generally, you can avoid the penalty if your total timely estimated payments and withholdings are greater than or equal to the lesser of:

• 90% of the total tax after credits for the current year, or
• 100% of the total tax after credits in the prior year
• See one exception below.

You can also avoid the penalty if the amount you owe is less than $1,000 as long as any estimated tax payments you made are timely.

Note: High-income taxpayers. If your adjusted gross income (line 11 of your 2023 Form 1040) is greater than $150,000 (or $75,000 if you're married and file a separate return from your spouse), you can avoid a penalty by paying at least 110% of your total tax from the prior year.

Each Period for the annualized method:

1. Period (a) includes items for January 1 through March 31.
2. Period (b) includes items for January 1 through May 31.
3. Period (c) includes items for January 1 through August 31.
4. Period (d) includes items for the entire year.

The first three periods could be calculated by your total income for the year without the IRA distribution (assumes the rest of the year was equal in income) then divide by 12 and multiply by the number of months in each period.  In the last quarter add the IRA taxable distribution.

@jappaj2