TurboTax's system is saying that I had an underpayment penalty for 2022 but that is not true. The IRS website shows I don't owe anything. How can I fix this?

[msit202448]

TurboTax's system is claiming that I underpaid for the 2022 tax year and that I should have received a 2210 form from the IRS. I did not receive anything and did not underpay. When I check the IRS website it shows that I owe $0 dollars on my 2022 tax year. I can't seem to edit this on TurboTax.

[JohnB5677]

Please clarify your question.

Unfortunately, we can't see your tax return to to evaluate your problem.   I'll have to ask you a couple of questions.

Did you already file a 2022 tax return?

Are you preparing a new or amended 2022 tax return?

Do you owe taxes on the return?

When and how did you get the message that you have a penalty?

Please contact us again with any additional questions or to provide some additional details.

[msit202448]

Hi John

Yes I already submitted a 2022 return. I don't owe anything on that (as confirmed by completion of my return and on the IRS.gov website). I am not preparing anything for 2022 but am now in the process of preparing my 2023 return. However, the TurboTax system is saying I have an underpayment penalty for the 2022 return which is not the case. Only TurboTax informed me of this during one of the steps. I have not received any such information from the IRS.

[DawnC]

Are you using the 2023 tax software?   If you are and TurboTax is telling you that you have a penalty, it is for 2023 - the tax return you are filing now, not 2022.  

The IRS levies underpayment penalties if you don't withhold or pay enough tax on income received during each quarter. Even if you paid your tax bill in full by the April deadline or are getting a refund, you may still get an underpayment penalty.

To possibly reduce or eliminate your underpayment penalty, open your return in TurboTax and search for annualizing your tax (use this exact phrase). This will take you to the underpayment penalty section and we'll take you through the steps to possibly reduce what you owe.

[msit202448]

Hi Dawn

Thanks for this context. So it is asking me to annualize my income in that case. A few questions:

1. How do I know if I qualify to annualize my income?
2. Do I calculate the quarterly income myself from my paystubs? Or how do I do this?

[JamesG1]

IRS 2023 Instructions for Form 2210 , page 8, here states:

If your income varied during the year because, for example, you operated your business on a seasonal basis or had a large capital gain late in the year, you may be able to lower or eliminate the amount of one or more required installments by using the annualized income installment method. Use Schedule AI to figure the required installments to enter on Form 2210, Part III, line 10.

You may need to refer to paystubs, bookkeeping records and/or banking records to determine the income reported for each period.

Your income must be allocated across the following periods.

1. Period (a) includes items for January 1 through March 31.
2. Period (b) includes items for January 1 through May 31.
3. Period (c) includes items for January 1 through August 31.
4. Period (d) includes items for the entire year.

Note. Each period (see the top of Schedule AI) includes amounts from the previous period(s).

[ronsto]

I'm having the same issue. 

[ronsto]

I'm attempting to do my normal 2023 taxes and near the end of the (during the Federal Review) it is stating that I have an underpayment penalty. I used Turbotax last year and filed\paid my 2022 taxes (last year). 

[VolvoGirl]

Do you have a penalty on 1040 line 38?  It's not for filing or paying late.  It doesn't have to do with last year's tax return or not paying estimates for this year.  The penalty is an "estimated" amount.    It's a penalty if you owe too much or for not paying in enough withholding during the year or not paying in evenly.  Even if you are getting a refund you can still owe a penalty.  It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[ronsto]

Thank you! That clarifies the scenario. I appreciate the insight 🙂

[ronsto]

Issue resolved.