Software not filling out form 2024 FTB 5805 (Late Penalty) correctly

[lydlen]

Thanks for the reply.

Using DESKTOP premier updated today.

YES/Filled out entire underpayment section.

I do not qualify for the $500 or 90% of 2024 exemptions.

I DO qualify for the 110% of 2023 exemption. (But will be billed without 5805.)

Any thoughts?

[MonikaK1]

According to the form, If you qualify for the 110% of 2023 exemption, or another exemptions, then the Form 5805 is not required to be submitted.

Form 5805 (FTB is not posting 2024 forms, but this has not changed) states:

IMPORTANT: In most cases, the Franchise Tax Board (FTB) can figure the penalty for you and you do not have to complete this form. See General Information B. If you meet any of the following conditions, you do not owe a penalty for underpayment of estimated tax. 

Do not complete or file this form 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 2022 tax return if they do not meet one of the two conditions above.
 

@lydlen

[marilynsanta]

Thank for the response, HOWEVER, if I don’t fill in the form (and override the calculated field), it says I owe $92 in penalty.  

[MonikaK1]

In the California return, 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.

You can avoid the 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.

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.

@marilynsanta 

[babyrd55]

MonikaK1,

The genesis of this thread was that TurboTax is not carrying the 2023 CA state liability correctly onto the 5805 at Part II line 5. If this were fixed - and I'm pretty sure it worked in prior years - then much of the question/confusion at this point would never occur because TT would correctly calculate no penalty. Does TT have any plans to fix that issue?

Personally I always pay in enough to avoid the penalty and the only times I've seen the form come up in the past are when I needed to use the annualization method due to some odd transaction late in the year bumping my taxes. Even if my tax liability increased significantly year-to-year I've never had to deal with this before as (presumably) TT did fill in that 5805 slot correctly so the form never showed up, just sat on the sidebar (I use direct entry rather than interview).

[MonikaK1]

I just tested this with TurboTax Desktop. I entered a large amount for the 2023 tax where prompted in the Underpayment Penalty interview in the California return, and TurboTax correctly used 110% of that amount on Form 5805, Part II, Line 5. 

The Underpayment Penalty interview doesn't appear in the California return 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.

@babyrd55 

[ca76]

As of now, FTB 5805 line 5 is still not computed correctly. I have done several updates, but the problem persists.

I have created  a sample return with large CA tax due in 2024. 

token number is: 810997105-28098726

No matter what CA tax 2023 (last year) is in CA carryover worksheet, line 5 of FTB5805 is computed using a number totally unrelated to it. It is supposed to be either 100% or 110% of 2023 CA tax.

[MonikaK1]

Thank you for the data file. I see where the figure on Line 5 of the Form 5805 is coming from. It appears to be correctly using 90% of the current year liability because the AGI was over $1,000,000 in the sample return.

If you right click in a numerical field and select "Data Source" from the pop up screen, TurboTax should show the data source for that field. In this case, it provided a window that states for Line 5:

If the California AGI is less than $1,000,000 ($500,000 if married/RDP filing separately) then from:

Carryover Worksheet P/Y Tax Liability 
minus

Carryover Worksheet P/Y Tax on Lump Sum Dist 
minus

Carryover Worksheet P/Y Excess CA SDI Tax W/H

Otherwise from Line 2: (which was 90% of the current year tax).

The AGI on the test return exceeded $1,000,000, so the Form 5805 used the amount on Line 2 for Line 5.

The 2023 instructions for the form state:

If the California AGI on your 2023 tax return is equal to or greater than $1,000,000/$500,000 if married/RDP filing separately, enter 90 percent (.90) of the tax liability from your 2023 tax return on line 5.

The 2024 form states for line 6:

6 Required annual payment. Enter the smaller of line 2 or line 5. (If your California AGI is equal to or greater than $1,000,000/$500,000 for married/RDP filing a separate return, use line 2)

I am referring for further review the fact that the data source pop up window for Line 5 is confusing. The instructions for the form do state that if the AGI is over $1mil, to use Line 2 for Line 5 as well as Line 6.

The California form itself is confusing because it doesn't show that instruction for Line 5.

[Edited 03/25/25] 5:30pm PST] 

@ca76 (edited)

[ca76]

Thank you! That answered my question!Well explained!