I have never made estimated tax payments, but i just filed my return and have estimated payment forms and am being charged a late penalty

[rddobbyn]

why won't turbo tax let me waive a late penalty on estimated taxes when i've never paid estimated taxes

[fanfare]

it is not a late penalty,

it is an under-withholding penalty.

you must pay ahead at least 90% of last year's tax to avoid this.

It doesn't matter that you were OK last year.

[gloriah5200]

There are specific guidelines on whether or not an underpayment penalty is due.  We follow those guidelines and if it looks like you may need to increase your withholding or pay estimated payments so that you are not in the same situation next year, then the estimated payment vouchers will appear in your return.  If you want to use them, fine, if you don't then you don't have to but still need to be aware that you will probably have a penalty next year if you do not make changes in withholding or pay the estimated tax payments.

I am assuming that the penalty on your return is for an underpayment penalty, not a late payment since the filing deadline has not yet passed.

Please refer to the following link for additional information on having an underpayment penalty on your return:

How to review the underpayment penalty on my return

TurboTax is not the one to allow you to waive an underpayment penalty, but if you are inquiring about abating it with IRS, please refer to the following:

How will the underpayment be calculated, when is it determined, and when do I pay?  An estimated underpayment penalty is calculated by the program and paid with the return.

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.

If you decide to make an estimated tax payment for tax year 2020 it must be made on or before January 15, 2021.  Go to this IRS website to make a tax payment - https://www.irs.gov/payments

If the penalty is calculated then ...

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 Taxes or Personal (for H&B version)
Other Tax Situations
Additional Tax Payments
Underpayment Penalties - Click the Start or update button

https://ttlc.intuit.com/questions/2547642-what-s-the-irs-penalty-for-filing-late

Can I just let the IRS notify me?  After you file any underpayment penalty you have not yet calculated will be billed by the fed/state.  

If so, are they prompt?  Sometimes.

what can I do to not have to pay the underpayment penalty

[rddobbyn]

This is on my state form. I collected unemployment and retired and got my 401 which wasn't taxed. 

[gloriah5200]

We are waiting to see if IRS and states end up waiving any underpayment penalties or not.

If you wish to wait a little while to file your return to see if, in addition to IRS extending the filing and paying deadline to May 17, which states may also do the same.

You can repost the question again later after the states start responding on whether or not they are extending their filing deadlines.

[Opus 17]

Here is the key point.

The income tax system is supposed to be pay-as-you-go.  When you have a job, this is taken care of automatically through the withholding system. When you are retired or unemployed or have a large lump sum of income during the year, you are required to make estimated tax payments at least quarterly. This means making a payment by April 15 for income earned January through March, by June 15 for income earned in April and May, by September 15 for income earned in June through August, and by January 15 for income earned September through December.

The IRS definitely requires estimated tax payments and most states do as well.  If you fail to make the estimated payments on time, you can be subject to a late payment penalty even if you pay fully by the April 15 (or May 17 of this year) tax filing deadline.

Because you owed tax this year, TurboTax gave you estimated tax vouchers to make estimated payments for 2021 and avoid a penalty next year. You do not have to use the vouchers if you know that you will avoid a penalty because you will make estimated payments in another way or that your tax situation will be different.

For federal income taxes, TurboTax used to give taxpayers the option of declining the penalty. I always suggest this, because if you wait for the IRS to send you a bill for the penalty, you can request a one time abatement if you have a reasonable cause or if it is your first time owing a penalty.  I don’t know if your state would have a first time of penalty forgiveness, but it sounds like TurboTax is not even allowing you to bypass the penalty.  I suspect that your best option is to mail is to file your tax returns and pay the tax you owe with the penalty. The state and or IRS may send a bill for an additional penalty amount or may send a small refund, because the penalty calculation performed by the IRS is very complicated, and the penalty recommended by TurboTax is almost always a few dollars wrong one way or the other resulting in an extra bill or letter from the IRS.  At that point, you could file the forms to request an abatement of the penalty as a first timer.

[JaySF]

I'm not in safe harbor for estimated taxes and I had an unexpected capital gain in December and made an estimated payment to "cover it" in December.  What do I do in TurboTax to tell the IRS that I didn't under-withhold during the first three quarters, that the extra income was realized in the fourth quarter, and I shouldn't have a late payment penalty, since I didn't know about the capital gain when I made the first three payments?

[gloriah5200]

@JaySF

If your income was not "earned evenly" throughout the year, and especially if you had a larger amount of income in the last quarter, is why people prepare the "annualized installment method" on their 2210 with their return...it is more work and you have to break down the income, withholding and deductions through the different periods.

If you break down your income, withholding and deductions per month, then you can add together whatever months are being included in each "period" for the 2210 Annualized method.

Also, here is a link to the Instructions for the 2210

IRS Instructions for Form 2210

and here is a link to the IRS Form 2210:

IRS Form 2210

[JaySF]

@gloriah5200 

Thank you very much for your prompt reply.  Is filling in the 2210 something TurboTax handles with an "Interview", or do I need to drill down to the form and manually enter the numbers?  (I reviewed the instructions for the 2210 before I posted and found them incomprehensible but, if I must fill it out manually, I'll try and go step-by-step and see if I can get through it.) 

Would you happen to know, if I manually fill out the 2210 using "forms", will I still be able to eFile from within TurboTax, or will I have to print and mail?

Sincere thanks,

Jay

[VolvoGirl]

You should be able to fill it out in the interview steps.  Also you can go into Forms and check a box to not include it and let the IRS calculate it.  

If Turbo Tax doesn't automatically fill it out you can add it yourself.  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

[JaySF]

@VolvoGirl 

That sounds very promising!  Thank you for your help!!

Best wishes,

Jay

[fanfare]

If your quarterly withholding and estimates in 2023 are at least 100% / 4 = 25% ( 110% / 4 for certain high income taxpayers) of your 2022 tax, there will be no penalty on your 2023 tax return, regardless of any amount of 2023 income.
you are protected against a sudden capital gain or other income spike during the year.
you know your prior year's tax when you file by April 15, which is also the first estimated tax payment due date.

This is the simplified method that eliminates 2210 Schedule AI.

Sorry this won't help you this tax season.