please explaiin tax penalty and possible penalty exception

[croche1]

why do i have an underpayment penalty

[CesarJ]

An underpayment penalty is charged by the IRS if you did not pay enough tax throughout the year through withholding or estimated tax payments. This penalty aims to encourage taxpayers to pay their taxes on time and in sufficient amounts.

You may owe an underpayment penalty if you owe more than $1,000 in tax after subtracting withholding and refundable credits, and you did not pay enough quarterly estimated taxes or withholding by each deadline.

There are exceptions to this penalty, such as if:
1. Your total withholding and timely estimated payments equal at least 90% of your current year's tax or 100% (110% if higher income) of last year's tax.
2. You owe less than $1,000 in tax after credits.
3. You qualify for certain special rules like being a farmer or fisherman.
4. You were unable to pay due to a casualty, disaster, or unusual circumstance.

The penalty is calculated using Form 2210 and usually includes interest on the underpayment amount.

[VolvoGirl]

The penalty on 1040 line 38.

It's not for filing or paying late.  It doesn't have to do with last year's tax return or not paying estimates for this year.  The penalty is an "estimated" amount.    It's a penalty if you owe too much or for not paying in enough withholding during the year or not paying in evenly.  Even if you are getting a refund you can still owe a penalty.

The underpayment penalty amount Turbo Tax calculates on your 1040 or state is only an estimate.  Turbo Tax can not figure it accurately because they don't know exactly when the IRS or state will get your return and tax due payment.  It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

If Turbo Tax calculates a penalty on 1040 line 38…..You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button