Form 2210 Underpayment of Estimated Taxes Why?

[mklichtscheidl]

Getting 1 error when validating Federal that throws up a Form 2210 and to Check IRS to Figure Penalty Box

Why is this happening?  Have never done annualized or estimated taxes.  Spouse got laid off last March due to Covid and received unemployment (MN Fed and State taxes withheld), along with Stimulus payments for both of us twice for 2020. I have no idea why this is popping up or what it is all about.  Need help with resolving this

[ErnieS0]

You are seeing Form 2210 because TurboTax is computing an underpayment penalty based on your entries. Do you owe tax? You may have an underpayment penalty if you did not withhold enough.

Many taxpayers received large unemployment benefits due to the $600 per week Pandemic Unemployment Assistance. When PUA is added to their total income, the total tax rate ended being higher than the withholding rate on PUA.

If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

Related Resource:

• Topic No. 306 Penalty for Underpayment of Estimated Tax

[mklichtscheidl]

So I'm guessing due to unemployment compensation that an insufficient amount of tax was not withheld so now it's my problem?  So it's saying my penalty is $16 because someone else screwed up?  It's not the amount, $16 but government and IRS getting out of hand that this is a 'penalty' instead of just adding the difference to what we are already paying in.  Why the penalty for nothing we did wrong? 

So my solution is to click the 'IRS to Figure Penalty Box' and wait for a separate bill from them?  

[ErnieS0]

Form 2210 is not ready in TurboTax which is why the program is currently defaulting to Let the IRS Bill Me Later. Once the form is available you will have options to reduce or eliminate the penalty. Form 2210 is scheduled to be available on February 25.

Once the form is available, you can annualize your income. The IRS is a pay-as-you-go system. The default penalty calculation spreads income and tax payments equally through the year, regardless of when received. Annualizing will reduce your penalty if most of your income was received in the second half of the year.

You can also request a penalty waiver due to a casualty, disaster, or other unusual circumstance.

The law allows the IRS to waive the penalty if:

1. You didn't make a required payment because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect.

For more information, refer to the Instructions for Form 2210 

[Scooby19]

It is probably a rounding error of $1.00 in one of the quarters that make the sum total for the year off.   If you used Form 2210AI to report annualized income --basically uneven income throughout the year, or maybe a late year IRA withdrawal, will trigger penalties and it is confusing until you understand the reason for the form. I'd try adding a dollar to one of your quarters and see if that fixes the problem.  We users hit TT hard last year about these rounding errors and they haven't fixed it.