recover underpayment penalty

[ATXTax]

I filed my 2022 tax return and it was accepted. However, I recently discovered that I paid an underpayment penalty, even though I had paid more than 100% of my tax liability from the previous year (2021). This penalty was due to my mistake of skipping the 'other tax situation' section on my return.

I attempted to correct this by importing my original return into TurboTax and filing an amended return, but I encountered numerous issues with TurboTax's importing process. Despite several calls to their support team, I have not been able to make any progress.

To resolve the issue, I would like to know if I need to file an amended return (Form 1040-X) to claim a refund of the underpayment penalty or if there is an easier way to do so.  Thanks in advance!

[guywong]

Depending on your filing status,  your Adjusted Gross Income (AGI), and how you paid your taxes, you may be subject to an underpayment penalty even if you have paid in 100% of your prior year's tax liabilities.  Here are two useful IRS links, the first link shows how you may dispute an underpayment penalty.  Form 2210 is used to calculate underpayment penalties.

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

https://www.irs.gov/pub/irs-pdf/i2210.pdf

Basically, for most taxpayers, if your 2021 AGI exceeded $150,000, you are required to pay in 110% (not 100%) of your 2021 total tax liabilities or 90% of your 2022 total tax liabilities EQUALLY throughout the year.  Withholdings are assumed to be paid equally (if they are not, you can adjust the withholding amount on Form 2210).  But quarterly estimated taxes must be paid in 4 equal installments.  You can't skip Quarter 1 and make it up in Quarter 2 without incurring an underpayment penalty.

[ATXTax]

Yes my AGI was higher but I paid actually 140% of prior year's tax liabilities with increasing my tax withholding thought W4. 

[guywong]

With your 2022 withholding exceeding 110% of your 2021 total tax liability, you shouldn't be charged any underpayment penalties.  Did TurboTax prepare a 2022 Form 2210 for you?  If not, prepare a Form 2210 and send along a protest letter to the IRS at the service center where you would have filed your tax return if you had filed it on paper and request a waiver of the penalty.

Another thought is since TurboTax is supposed to guarantee the calculation accuracy, perhaps contact Intuit and see if they will reimburse you the underpayment penalty.  Did you use TT to prepare your 2021 tax return?  If not, did you input your 2021 data summary to TT?  I'm new to TT, so I don't know exactly what and how the TT guarantee works.  May be someone else will chime in.  Good luck!

[VolvoGirl]

I don't think you can amend for the penalty.  Maybe you can fill out and add form 2210.

The amount Turbo Tax calculates on your 1040 line 38 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 you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year.  Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid 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.

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

If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form.  If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column.  Type 2210 in the search box and open the 2210 form.  Check box C to let the IRS calculate it.

IRS form 2210

https://www.irs.gov/pub/irs-pdf/f2210.pdf

2210 Instructions

https://www.irs.gov/pub/irs-pdf/i2210.pdf

[ATXTax]

I'm wondering if I can simply send the 2210 form to the IRS so that they are aware of the penalty I paid with my original return and can refund it. Additionally, should I also file form 843? Thank you for your assistance.

[fanfare]

Your penalty is on line 38.

The IRS already has that without seeing your Form 2210.

Why do you think they would refund your penalty?

@ATXTax 

[ATXTax · Accepted solution]

The problem has been resolved. The IRS sent me the exact amount I was seeking, acknowledging the penalty I accidentally paid and issuing a refund for that portion. I was pleasantly surprised to discover that they took this initiative without me having to request it. However, I must express my disappointment with Turbotax. I spent over three hours on two separate occasions, engaging in screen-sharing sessions with their customer support, trying to resolve issues with their importing function for amending my taxes. Unfortunately, the results it provided were not sufficient for informing the IRS, and the support professionals were unhelpful in addressing the obvious bugs in their system. Instead of acknowledging the flaws, they attempted to defend the nonsensical values it produced. I have already sent my file to Turbotax for their research twice, but the incorrect values persist. Thankfully, the IRS accurately calculated my refund and sent it accordingly. As a result of this frustrating experience, I have made the decision to part ways with Turbotax. Farewell, Turbotax.