Underpayment penalty - amended return

[102jmh]

I 've already e-filed my 2019 taxes which subtracted an underpayment penalty from my refund.  I later realized that if I annualized my income I could eliminate this penalty.  I went into TurboTax to amend my return to get my penalty back.  I entered all the required annualized info and it agreed with me that I don't owe a penalty. However when I look at form 1040X it doesn't show me getting back the penalty, it appears as if nothing changed. It shows my original refund without the penalty and the amended refund (also without the penalty) so there is no difference between the amended refund and the original refund.  How do I get TT to create an amended return where it takes into account the penalty on the original return?   

[LinaJ2020]

Generally, if changing the information does not create a difference in your total refund or tax due, you do not need to amend. Without seeing your tax forms and program, I won't be able to tell.  

I would suggest you consider using TurboTaxLive to file your 2019 taxes.  This way you could have one of our tax professionals to review your tax forms. 

To reach one of our tax professionals, in the TurboTax program, once you complete your taxes, before you file, you’ll be given the option for a final review of your return by one of our experts.  After they completed reviewing your return, they’ll inform you of any proposed changes.

Here are the instructions:

https://ttlc.intuit.com/community/choosing-a-product/help/what-is-turbotax-live/00/27191

[102jmh]

The only thing that I'm changing is that the original return used the short method for estimated payments due and averaged my tax liability evenly over each payment period. In doing so it calculated that I owed a underestimated tax penalty. Since my income varied greatly in Q4, I filled out form 2210 with the annualized method and no penalty is owed.  TurboTax doesn't show the penalty on column A of form 1040X so it's not making an adjustment in column B so that I can get the penalty refunded.  I looking for help on what I need to do to get TurboTax to take into account the penalty on the original return.  

[JulieS · Accepted solution]

If you go back through the amendment process, it asks you to verify your original refund. You can change the amount of your refund on that page to show the refund that included the penalty. 

This will show that you get a refund of the amount of the penalty. Line 18 is the amount as shown on your originally filed return.

I would also make clear in your amendment explanation that you are amending to eliminate the penalty. Be sure to attach your Form 2210 to your Form 1040X.

[102jmh]

I went back into the program and using the Step-by Step approach it never asked me to verify my original refund. It asked about my 2018 tax liability and my 2018 AGI but nothing else.  However  when I went to the 1040X that it generated, I was able to modify two things that enabled me to get my penalty refunded.

First I had to check box E in the "Manual Selection of Lines Calculated Worksheet" to get numbers to populate in columns A and C.  Originally box B was checked and there were no numbers. Second I manually changed the overpayment in the section "Original 2019 return overpayment worksheet" . When I made these modifications the 1040X then calculated a new overpayment which was the amount of the penalty.  So if I file the 1040X with the Form 2210 I should be in good shape. 

Seems like the step-by -step method should have allowed me to do this rather than going to the forms directly!

Thanks for your help 

[cparke3]

Can you confirm if this actually worked when they processed your amended return?

Amended returns are manually reviewed and processed.  Penalties, including underpayment penalty, are not explicitly waived or removed through an amended return.  I think IRS has a different process for dealing with penalties called, "abatement"

What the advice here has basically told you to do is treat the penalty you paid as an additional tax deducted from your refund.  I'm not sure that's going to pass muster with IRS, however.

[cparke3]

That procedure might make the math work, but really it's fudging the numbers of the original return to get a desired result.  Is this really a recommended procedure?

[anabrown]

Hello, I have a similar situation except I owed taxes. I qualify for the exception to the underpayment penalty due to a covered disaster area. Underpayment penalty was included in total taxes I owed. 

When I try to amend in TT, the refund counter just goes to 0, and I'm not able to show the positive amount of underpayment to show up. 

To make the maters more complicated, IRS sent me the partial refund for underpayment penalty (which is what prompted me to look into it). 

What's the best way to untangle all this in TT? 

Thanks.

[cparke3]

There are a few tax forms and charges included on your annual Form 1040 that actually are separate filings. Form 5329 is a good example; this form is for various penalty excise taxes, not income tax, and it can be filed standalone as well as together with Form 1040.

Amending and requesting refund of these extra taxes similarly cannot be accomplished with Form 1040-X alone, even if TurboTax prepares the form that way.

In the case of penalty taxes like underpayment penalty, the way to request that refund is to include a Form 943 for the Penalty Abatement together with Form 1040-X for the income taxes changes that justify it!