turbotax mis-calculating quartery withholding

[riogrande]

When I was filing my taxes on the 15th I noticed that the TurboTax deluxe cd applied a penalty of $31.  There was no information about a federal penalty but earlier turbotax gave me the option of letting California calculate a under-estimate of withholding penalty. I said what?  Turbotax calculates my quarterly withholding for me and supplies four forms to file.  However, further investigation showed that TurboTax was miscalculating the withholding.  Because of the higher interest rate, I made more money this year than last year.  But this should not have been an issue.  The IRS says:

If you didn’t pay enough tax throughout the year, either through withholding or by
making estimated tax payments, you may have to pay a penalty for underpayment
of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less
than $1,000 in tax after subtracting their withholdings and credits, 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.

TurboTax knows your current year taxes so they should make the quarterly withholding based on those taxes.

It's unclear how they calculate the quarterly withholding, but they underestimate the taxes and can cause you to have to pay penalties.

This year, TurboTax miscalculates the quarterly withholding again, but now I know how to manually correct it. You have to use your current taxes to calculate the quarterly payments to be sure to avoid penalties for insufficient withholding.

.

[maglib]

During the estimated taxes, you choose if you want to create estimates based on py, or current year, 90% of current year or any number you choose. That is not TT error. If you want a safe harbor always choose what you owed the prior year and make sure the amounts withheld by your employer are accurate. Then there are years that the govt reduces withholding which could cause issues. You complete the forms. You need this flexibility as many have dramatically different annual incomes so there would be reasons to choose.
Estimated tax payment safe harbor details
The IRS will not charge you an underpayment penalty if: You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or. You owe less than $1,000 in tax after subtracting withholdings and credits.