TurboTax is saying that I owe an understatement penalty from last year on my state taxes, but I overpaid last year and got a refund. How can I fix this?

[milisama]

Is TurboTax not uploading last year's tax documents correctly? Is there some way to fix this before I submit my filing?

[Wyatt17]

Given the information you posted in your question, your should just be able to file your return and ignore the "understatement penalty" issue. If you received a refund last year you should be fine for this year. If the IRS determines that you do, in fact, owe a penalty, they will notify you.

[milisama]

I made a typo in my original post, I meant underpayment not understatement. Also, the problem was that my info from my W2 wasn't importing correctly. I'm not sure why, but I switched to a different tax service and didn't have the same problem. When I contacted TurboTax customer service they couldn't figure it out either.

[ErnieS0]

Do you pay estimated taxes? It’s possible to have an underpayment penalty even with a refund. The IRS and states follow the pay-as-you-go model, meaning your tax payments should match your tax liability over four “quarterly” periods.

How can you get an understatement penalty with a refund? 

Supposed you sold a house on January 1 for a big profit but never paid tax until December 31. You’d have an underpayment penalty because you were supposed to pay the tax due on the sale in the first quarter, and not wait until the end of the year.

If you received your income unevenly, you can annualize your penalty by matching your income with your tax payments.

If you tell us what state you are working on, we can give you more guidance.