The "amount you owe" formula on 1040 line 37...

[Frank nKansas]

In TurboTax "Forms View", Form 1040, line 37 states "Subtract line 33 from line 24.  This is the amount you owe".

However that does not seem to be correct.  Line 37 also includes the "Estimated Tax Penalty" on line 38.

I just received a notice from the IRS stating I still owed $117.  It seems that the "estimated" amount on line 38, $250 in my case, did not fully satisfy my under payment penalty.  Perhaps the $117 does not include an additional penalty.  Rather it is just a correction to the original estimated amount of $250. 

I want to be sure that an underpayment of the "Estimated Tax Penalty" does not result in an additional penalty.  If it does, I'd be inclined to overpay the estimated amount to begin with.  Perhaps doing so would require an "Override" in TurboTax. 

Can anyone confirm or correct any or all of the above?

Thanks!  

[Mike9241 · Accepted solution]

the estimate tax penalty on line 38 is just that an estimate. (don't know if there was a bug in Turbotax) Sometimes the info the IRS has like estimated tax payment dates will differ from what the taxpayer has entered then line 38 is can be too high or too low.

you do have options

1) pay it and do nothing else.

the following options would be to see if you can lower the penalty

2) use the annualized income installment method 

3) if you had withholding use actual withholding for 1/1-4/15, 4/16 -6/15 and 6/16-9/15 and 9/16-12/31

4) both 2 and 3.  

I'm not sure how you can check the IRS calculation vs the one Turbotax did. however, since you are using desktop you can see Turbotax calculations by using the search box for form 2210. Forms>open form>2210. then double click on the form to open it. 

[VolvoGirl]

Yes line 38 is easy to miss.  And it can also reduce a refund on line 35a.  It's only an estimated penalty.  It's common and normal and expected for the IRS to adjust the penalty and bill you for more or send you a refund. 

You can save your return with another name to test in.  Go up to File-Save As.   Then you can fill out the 2210 worksheet.  It's under....

Federal tab 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. 

[fanfare]

If you enter the exact dates of Estimated Tax payments, your penalty can be calculated correctly.

If TurboTax does not ask for the dates, boo on TurboTax.

If TurboTax does ask for the dates, and calculates the wrong penalty, that's bad.

@Frank nKansas 

[Frank nKansas]

regarding @fanfare ... "If TurboTax does ask for the dates, and calculates the wrong penalty, that's bad."

The exact dates of my estimated payments were entered.  I don't understand why TurboTax can't figure out the exact penalty.  Why does TT have to "estimate" the penalty?  Why is it that the IRS is able to calculate the penalty but TurboTax isn't able to?

Do we have any way to calculate what the penalty should be?  Seems odd we aren't able to double check IRS's findings.

[fanfare]

The formula is published on the IRS website.

[fanfare]

https://www.irs.gov/instructions/i2210#f63610i01

Try implementing that in COBOL.

@Frank nKansas 

[mesquitebean]

One could interpret the words "estimated tax penalty" on Line 38 as meaning "penalty for estimated tax" rather than "estimated penalty."   It depends on how you interpret those 3 words.   The IRS instructions also refer to it as "Estimated Tax Penalty" (see image).

.

[VolvoGirl]

I know.    I had a refund once and still had a penalty for not paying in evenly during the year.