Is TT correct to say we need file Form 5805? TT calculates (correctly) we owe $1600+ in 2024, but 2024 w/h is 126% of 2023 total tax due. Form sez if we're 115%+ no need?

[JJK2]

Altho we are 19% under withheld in 2024, '24 wh is 126% of 2023 CA total tax due. Is TT in error, or am I missing/misreading something in 5805 instructions?

[MonikaK1]

For California, you can avoid the underpayment penalty if:

•  The amount of your tax liability (not including tax on lump-sum distributions and accumulation distribution of trusts) less credits (including the withholding credit) but not including estimated tax payments for either 2023 or 2024 was less than $500 (or less than $250 if married/RDP filing a separate return). 
• Your 2023 return was for a full 12 months (or would have been if you were required to file) and you did not have any tax liability on that return. 
• The amount of your withholding plus your estimated tax payments, if paid in the required installments, is at least 90% of the tax shown on your 2024 return or 100% of the tax shown on your 2023 return (110% if California adjusted gross income (AGI) was more than $150,000 or $75,000 if married/RDP filing a separate return) and you are not using the annualized income installment method. Taxpayers with California AGI equal to or greater than $1,000,000 (or $500,000 if married/RDP filing a separate return) must use the tax shown on their 2024 tax return if they do not meet one of the two conditions above.

In the California return interview, the Underpayment Penalty questionnaire doesn't appear unless TurboTax has tentatively calculated a penalty based on the income and payment information you entered. 

In that case, you will see Underpayment Penalty listed as an item under Other Situations and you may also see a screen prompt before you get to the end of the California items asking if you want to go over the penalty section now. Respond "yes" to "Would you like to review this topic?". If yes, you are given the choice to let the Franchise Tax Board calculate the penalty and send you a bill, or to complete the questionnaire.

Complete the questionnaire rather than attempt to override the form. If your answers to the questionnaire result in eliminating the penalty, then Form 5805 won't be included with your return. If you otherwise are liable for the penalty, the FTB will calculate it. 

See this FTB webpage for more information about California penalties.