Using Turbo Tax for many years, I've started seeing a $129 "penalty and interest" item show up when filing my return well on time. Why the penalty?

[tomcorbett2003]

For the last two years, I've had a $129 penalty appear when filing my return on time with Turbo Tax. Why?

[BrittanyS]

Is there are tax due on your return?  If so, is the balance being paid prior to the deadline?

[tomcorbett2003]

Always file on time but still got $129 penalty on 2023 and 2024 fed tax return? Why?

[ThomasM125]

I believe you are referring to a late payment of tax penalty. That happens when you don't pay your income tax in on a timely basis in a sufficient amount. Even if you file your tax return on time you can receive that penalty as it has to do with when the tax is paid, not when the return is filed.

For the most part, you are required to pay in 100% of your tax from the previous year or 90% of your tax for the current year on a quarterly basis to avoid the late payment of tax penalty. Also, if you owe more than $1,000 when you submit your tax return, you will likely get a penalty.

[tomcorbett2003]

So, I always pay the full amount due via bank withdrawal. You now say if I owe the feds more than $1000 I get a penalty! I’ve never heard that in all the many years I’ve been using Turbo Tax.  If so, why doesn’t Turbo Tax warn us about such a penalty? That’s a pretty severe thing to not tell us about. ???

[VolvoGirl]

@tomcorbett2003   Do you have a penalty on 1040 line 38?  It's not for filing or paying late.  It doesn't have to do with last year's tax return or not paying estimates for this year.  The penalty is an "estimated" amount.    It's a penalty if you owe too much or for not paying in enough withholding during the year or not paying in evenly.  Even if you are getting a refund you can still owe a penalty.  It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

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 if you want to let the IRS calculate it.

[IsabellaG]

If you are in fact subject to an estimated tax penalty for not paying in sufficient tax throughout the year, the TurboTax program will alert you to that situation, and give you an opportunity to lower that penalty (for instance if you met any exceptions to the penalty, or if you earned the income unevenly during the year.)

TurboTax will also recommend Estimated Tax Payments on Form !040-ES if you will be in a similar situation in the current year. 

For more on Estimated Taxes, see this link