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Level 2
posted Apr 11, 2021 6:05:55 PM

shouldn't I be getting underpayment penalty?

I am completing my taxes and expected TurboTax to tell me I owe an underpayment penalty, but nothing is alerting me to this as I run through the program.

 

My withholding through work has never previously resulted in need to owe fed taxes. In March, 2020 though I sold several stocks and generated a $30,000 long term capital gain that I did not pay taxes on at the time.  As a result, this year I owe over $5,000 in taxes for 2020.  But, since my withholding during 2020 did not exceed 110% of my tax bill from 2019 (1040, line 16), shouldn't I be assessed a penalty? Thanks

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1 Replies
Expert Alumni
Apr 11, 2021 6:33:42 PM

If the withholding was 100% of 2019 tax, there is no penalty.

 

According to the IRS:

 

 “Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.”