Serious calculation error in TurboTax Deluxe 2025 on California Form 5805: Underpayment of Estimated Tax

[dmg33]

TurboTax 2025 is telling me that I owe a penalty for underpayment of estimated taxes. Looking into it I see that there is a serious calculation error in how TurboTax is computing a critical field on California Form 5805: Underpayment of Estimated Tax by Individuals and Fiduciaries.

Here are the details: 

On California Form 5805, Part II is titled “Part II - Required Annual Payment”, and on Line 5 it is supposed to have an amount entered that is either your California tax liability for the previous tax year or, if you had an AGI greater than $150k for that tax year, it is supposed to be 110% of that amount. So at most the number on Part II, Line 5 should be 1.1 times your California tax liability from the previous year.

For me it is filling in that line with a number that is almost 3 times what it should be. If I double click on the field corresponding to Line 5 on Form 5805 it takes me to the source data for the calculation. Specifically, double clicking on Line 5 correctly takes me to Line 2 of the “California Carryover Worksheet for 2025”. Line 2 on that worksheet reads: “Tax liability (Form 540, lines 48, 61, 62; Form 540 2EZ, line 21; or Form 540NR, lines 63, 71 and 72; plus any IRC Section 453A interest from Form 540 line 63 or Form 540NR line 73)”. This is the tax liability from the previous tax year and TurboTax correctly shows me what my tax liability was for 2024. GOOD!

However, when it uses that correct number to calculate what should go on California Form 5808, Part II, Line 5, the number it uses is not that number or 1.1 times that number but it is 2.9 times my previous year tax liability. This is wildly wrong! From that point it then calculates that I should have paid in estimated taxes almost 2.9x what I owed last year and of course my payments for this year fell well short. So TurboTax calculates that I owe a significant penalty!

I’m not sure how to get TurboTax to fix this extreme error and I welcome suggestions as to how to report this issue to Intuit/TurboTax. Phoning the main number for support yielded a phone call of well over an hour with someone who had no idea.

Of course this issue should be solved by Intuit/TurboTax. However, is there a way to override a calculated field in TurboTax? I know the correct number to put in that field and if I could do it manually I believe I could address this issue for my personal return.

[MonikaK1]

In order for use to help troubleshoot this issue, you can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions for TurboTax Online users: 

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

 Here are the instructions for TurboTax Desktop users:

1. From the black bar at the top of your screen, select Online
2. Click Send Tax File to Agent
3. Click Send on the message that pops up
4. TurboTax will create a "sanitized" copy of your return information with no personal info
5. Post the full token number here in this thread

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[dmg33]

Thank you for responding.

I am extremely reluctant to provide my tax file as described in your feedback. One reason is that I have no way of knowing what is being transmitted to Intuit if I upload the file. While it may be scrubbed of person information I do not have a way of verifying that. A second reason is that if I provide the “token” to the reply to my message then that clearly links my account to the case or file I upload. Since my login here is through my Intuit login (with my email address) that token is linked to me. I don’t consider that anonymous at all.

My post makes clear exactly where there is an error. Specifically it describes that the California Form 5808, Part II, Line 5 number is determined by a calculation based on the correct data shown to me on Line 2 of the “California Carryover Worksheet for 2025”. While I have no doubt that having my data file would make it easier to debug this issue, I would expect that my clear description in my original post should allow examination of how the field on California Form 5808, Part II, Line 5 is programmed to work.

Happily, TurboTax offered me the option to have the state of California calculate any penalty rather than file my taxes with the incorrect penalty information computed by TurboTax. Unless this bug in TurboTax is corrected prior to the time I file my taxes that is what I plan to do.

That this issue exists brings up 3 thoughts:
How many other errors is TurboTax making in my tax computations? 
How many Californians will file with incorrect penalties being assessed?
I’ve used TurboTax now for a very long time but this makes me question whether I will choose to do so next year.

Thank you again for taking the time to respond. I hope that TurboTax can address investigate and address this error so that others do not encounter it.

[DaveF1006]

No. While your description is detailed, without specific data to work with, we have no way to find out if TurboTax is treating this incorrectly or if there is a misperception on your part.

Sending us a diagnostic file will pinpoint the error and will help us reconstruct the logic behind it.  The diagnostic file sent is scrubbed of any personal data or PII. I have been an Intuit seasonal employee for 12 years and we have never had legal issues with clients sending us diagnostic files. All that is sent to us are numbers specific to your tax returns.

There have been several who have read this post, and none can determine your issue without looking at the diagnostic file that is specific to your issue. If there is a calculation error that the developers need to look at, they will require a diagnostic file before troubleshooting.

[dmg33]

Thank you for responding.

I’m not willing to provide my file but i still encourage you to have your team look at this issue. It is very straightforward.

The law says that as long as you pay 100% of the amount you owed for the previous year’s taxes (110% if you were over a certain dollar threshold) then you do not owe a penalty. TurboTax handled this properly for the Federal portion of my return but not for the state of California.

.Specifically the California Form 5808, Part II, Line 5 number should be calculated to be either 100% or 110% of last year’s amount owed. TurboTax seems to properly reference the correct data shown to me on Line 2 of the “California Carryover Worksheet for 2025”. By “properly reference” I mean that if I double click on Line 5 of Form 5808 it takes me to Line 2 of the worksheet. And the worksheet correctly shows my 2024 California tax. But somehow the TurboTax calculated amount on Line 5 of form 5808 is wildly off.

I hope TurboTax is able to correct this error and save its users a lot of, money, trouble, and goodwill.

[fmullin]

I have the same problem.

Here is enough data for you to verify the error.

First, the law is that if your AGI  > $150K then your estimated tax payments for this year should be 110% of this year's taxes (as this poster stated).

But my taxable income exceeds $150K, while the total estimated tax payments  (TurboTax lists) is only 90% of this year's taxes.  And it's done it to me the previous two years.  So like this poster I've faces a underpayment fee.

[MonikaK1]

Even if you made enough total payments to meet the requirements, you could still be subject to an underpayment penalty for California if you didn't make all of the quarterly estimated payments on time in the correct amount.

Taxpayers are required to pay 30% of the required annual payment for the first required installment, 40% of the required annual payment for the second required installment, no installment is due for the third required installment, and 30% of the required annual payment for the fourth required installment. For more information, see the instructions for Form 540-ES, Estimated Tax for Individuals.

If TurboTax calculated a penalty, you can visit the Underpayment Penalty section of the California return under Other Situations and complete the interview questions to see if it makes a difference in the calculation.

Did you also review the Underpayment Statement in the California forms list? It provides a chronological listing by quarter of events or transactions that impact the penalty calculation, including rate changes during the year. If the dollar amounts and dates on the form are correct, the calculations on the statement appear correct.

@fmullin 

@dmg33 

[dmg33]

Thank you @MonikaK1 for your response.

I did make the Q1, Q2, and Q4 payments in the correct amount on the correct dates to meet the 110% payment of my 2024 taxes owed. And I continue to believe that the calculation of Line 5 is in error.

However, I discovered that California has a "new" law requiring payment of 90% of THIS year's tax if your taxable income exceeds $1M. (A new situation for me this year.) Since I've never exceeded that threshold prior to this tax year, indeed I have underpaid the required amount.

However, I don't believe that Line 5 should reflect that and I still believe the calculation for Line 5 is incorrect. Line 6 is where this should be addressed. There it says: "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)"

Again, the Line 5 calculation is incorrect but in my case I don't believe it will affect the overall calculation of any underpayment because Line 6 correctly uses the number from Line 2. Note that TurboTax has filled in Line 5 with the same number as Line 2 for some reason and I believe that is an error, but it does not affect my outcome.

I will file my taxes and let the state determine what, if any, penalty I owe.