Should I ask for underpayment penalty waiver?

[NJ_Devils]

I owed taxes on my Federal taxes for 2022, and I paid them without any underpayment penalty. This year, Turbotax indicates I might owe an underpayment penalty. 

Part of the reason is that I got some shares that vested this year, which bumped up my W2 wages. This is my first ever vesting so I didn't know about this. Should I claim a waiver for an underpayment penalty based on my first ever experience with vesting? or is this just going to create more problems for me?

Also, I have zero allowances on my W4 so I don't know what I can do to avoid this underpayment in the future?

[Mike9241 · Accepted solution]

Evidently your employer did not take out enough withholding to cover all the taxes on additional income from the vesting.

I doubt you have reasonable cause. you can try  these options to see if your penalty is lower

1) annualized income page 3 of 2210

2) actual withholding for each period rather than the default of 25%

3) both 1 and 2

the simplest way to avoid penalties for 2024 is to have your withholding equal 100% of your 2023 tax. it's 110% if your 2023 adjusted gross income is over $150K

There are other ways such as withholding equal to 90% of your 2024 tax but you don't know this until you complete the 2024 return