Both during the federal and CA state process, I was notified that there are penalties being levied for tax liabilities. As far as I can make out from my 2019 return, there shouldn't be any penalties. What should I be looking for or reviewing in order to set this right?
Using TurboTax Premier 2020 online.
The federal underpayment penalty generally applies when you owe more than $1,000 in federal tax on your tax return. Per the IRS, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid 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.
To review your federal underpayment, please follow the instructions below:
- Open your return.
- Search for underpayment penalty with the magnifying glass tool at the top of the page.
- Select the Jump to link at the top of the search results.
- Review your underpayment and see if you qualify for an exception.
For California, you will be assessed an underpayment penalty if:
- you owe at least $500 or $250 if married/RDP filing separately and
- your withholding and credits are less than the smaller of one of the following:
- 90% of current year’s tax
- 100% of prior year’s tax