Penalties & Interest

[user17581251833]

I filed late and owed and did not file for an extension. However, when I did file Turbo tax did not calculate the proper amount that I owed (in penalties), so then I got a bill from IRS... with all these extra charges that the software should have and could have accounted for... the software asks a bizillion other questions, why not these???

[xmasbaby0]

Only the IRS calculates the late filing penalty and interest owed---based on how much you owed, when they receive your return and how much you pay at the time you file the return.  TT does not calculate the late filing penalty or interest since TT has no way to know when the return will be received/accepted by the IRS or if your payment of tax due was made.  

[Andrew_W]

TurboTax does not calculate tax penalties as these are not a part of the tax return itself. The IRS does not have a specific form or process for calculating these along with your return, which is why TurboTax does not calculate this with your return. TurboTax will only calculate the original tax liability on the return. 

If you are subject to failure to file or failure to pay penalties, the IRS will calculate these separately, including interest rates (which fluctuate quarterly), and will send you a notice detailing the penalty, as you have experienced. 

[user17581251833]

Thank you for responding, but I disagree.  TT has the ability to calculate based on the electronic filing date.  In addition, you can at least send us to a page that list the current penalties (i.e., failure to pay est prop tax... $90, failure to file $515, etc.). There are some disclosures that TT can add, or send a direct link to the IRS site. .. "If you are filing late with an extension, then see page 99998 of the IRS code to know what additional charges you may be facing LATER" this TT can do?  I get that about % calculations based on exact dates and exact amounts owed.

[shirleyp4]

IRS publishes penalties and interest that may be assessed to individual or corporate taxpayers.

Penalties

IRS charges various penalties, including the following if you don’t:

• File your taxes on time.
• Pay any tax you owe on time and in the right way.
• Prepare and file an accurate return.
• Provide accurate and timely filed information returns.

Below are links to some of the penalties and the penalty amounts. To see a list of additional penalties, visit Penalties.

• Failure to file when you don’t file your tax return by the due date.
• Failure to pay when you don’t pay the tax you owe by the due date.
• Underpayment of estimated tax by individuals when you don’t pay estimated tax accurately or on time.

Quarterly Interest Rates

IRS publishes current and prior years interest rates for individuals and businesses to calculate interest on underpayment (balance due) or overpayment (refund) balances.

@user17581251833

[pugetsoundguy]

I agree with the frustration that turbo tax will not show how the interest was calculated for, I am guessing but do not know, possible late on estimated payments penalty.  Turbo has clearly calculated one but does not show how or why and I disagree with the conclusion that a penalty is due.  Turbo tax needs to show how and why it calculated penalty interest.  A response that the IRS publishes how to calculate one is not very useful.

[DianeW777]

The Form 2210 will show you the interest and penalty rates charged by the IRS each year. The following information will help to understand the process of calculating that amount.  The IRS is a pay as you go system which means when the money is earned the tax is due.

• Form 2210 Instructions - Penalty calculation Worksheet, page 7

It is possible to have a refund and still have an underpayment penalty if the payments were not paid equally across all payment dates. 

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 2025 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.

@pugetsoundguy