Tax liability

[MorogFar]

I'm told that I have a Possible Penalty. I'm working through the Possible Penalty Exception? In order to avoid some or all of the penalty, I have to answer "yes" to all of these questions:

- Was your 2020 tax liability zero.

- Was your 2020 return covering a full 12-month period?

- Were you a US citizen or resident in 2020?

I was a citizen; my return covered a full 12-month period; but what is tax liability? We worked and we paid our taxes but we received Federal and State refunds. Was my tax liability zero? Is that asking if I worked? Or is it asking if I had to pay Federal and State taxes (which we did not since we received refunds).

[AamilD · Accepted solution]

Your tax liability is the total amount of tax on your income minus any non-refundable credits such as child tax credit, saver’s credit, dependent care credit to name a few. So basically, just because you got a refund last year does not mean your tax liability was 0. It is the actual tax which you paid last year.

To see your 2020 Tax Liability, refer to your prior years tax return (Form 1040) and look at line 24.

[MorogFar]

Thank you. Very well explained.