Underpayment penalty missing

[yatoshura]

If I did not have a 2110 form for my 2024 return (but I still had a 23K underpayment) and TurboTax did not compute any new underpayment penalty for the new 2025 tax return, then does it mean there isn't any penalty this year as well despite I underpaid by 31K? If not, what is missing? I did not apply for a waiver and both year TurboTax seem to not detect a penalty. How can I confirm if there is actually no underpayment penalty for both years?

[DianeW777]

It depends. Here are the rules to determine if an underpayment might occur. Compare your returns with the information below which will allow you to see if a penalty is not required in your case.

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

The IRS is a pay as you go system which means when the money is earned the tax is due.

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.

[baldietax]

Form 2210 is not included in filing by default unless you select an exception method (Annualized Income etc)

If you are using desktop you can see Form 2210 in Forms mode, it will not be in the forms list but you can do Open Form and put 2210 into search, or you can double click through Line 38 even if blank and again on the worksheet.

Go to Other Tax Situations / Underpayment Penalties, it will ask to confirm your prior year tax information for the safe harbor calculation, see what is going on in that section.

If you didn't meet the 90% of current year tax then the safe harbor calculation must be referring back to 100/110% of the prior year tax.  If your prior year data didn't carry over then it may think your prior year tax was $0 and therefore no penalty is due.

Even if this is wrong, IRS will calculate it independently and send you a bill if a penalty is due.

[yatoshura]

So IRS will do the final calculation and send me a bill if I do owe an underpayment penalty even if TurboTax did not think do? Will there be interests added to the penalty when they send me the bill? When is the latest I can expect a bill if there is indeed a penalty?

[baldietax]

yes see Form 1040 instructions for line 38

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Because Form 2210 is complicated, you can leave line 38 blank and the IRS will figure the penalty and send you a bill. We won’t charge you interest on the penalty if you pay by the date specified on the bill. There are situations where the IRS can’t figure your penalty for you and you must file Form 2210. See Form 2210 for de-

tails.

but Turbotax calcs are solid and it's doing the same calculation IRS will do using Form 2210, just with different data e.g. 2024 AGI/tax info is based on the data you carry over or input, ES payment dates/amounts you input; whereas IRS will use its records for all the Form 2210 inputs.

I would suggest going over Other Tax Situations / Underpayment Penalties and/or reviewing Form 2210 to determine why Turbotax is concluding you don't owe a penalty each year; it's probably a simple explanation which will help with your tax planning going forward.