Underpayment of estimated tax penalty

[AlpernH]

Facts: My federal tax for 2023 was $73,602. 110% is $80,962. Withholding was taken out evenly over the year in the sum of $21,469.00. Therefore, I computed $59,493 was owed in estimated tax. ($59,493 + $21,469 = $80,962.)

My 2023 tax refund was applied to my 2024 taxes in the sum of $19,219.

On April 15, 2024 I paid $23,000 with an extension request.

On April 15, 2024 I paid an estimated tax payment of $17,274.

The total sum of taxes paid for 2024 was: withholding $21,469; + refund $19,219; + paid with extension $23,000; + estimated tax payment $17,274 = $80,962, which is 110% of my 2023 taxes. 

My understanding is that timely payment of 110% of last year's tax is a safe harbor to avoid an Estimated Tax Penalty. 

Why is turbo tax showing I have to pay an Estimated Tax Penalty?

[MarilynG1]

Yes, although we can't see your return in this forum, from what you stated, you should not incur an Underpayment Penalty.  

If you have entered all your 2024 withholding, and your return shows your 2023 refund applied to 2024, as well as Estimated Taxes you paid (Form 1040, Line 26), go back to Other Tax Situations > Additional Tax Payments > Underpayment Penalties,  Update.

Indicate YES, you want to Review, then YES To All Questions on the next page. You should get a page saying 'You don't owe an Underpayment Penalty, However Form 2210 must be filed with your return'.

If not, and you're using TurboTax Desktop, make sure your program is updated from the ONLINE menu at the top.  If you're using TurboTax Online, close the program, clear your  Cache and Cookies, and return to the section.

You can also delete Form 2210, and just let the IRS figure any penalty. 

Here's more detailed info on Form 2210, and an IRS Worksheet.

@AlpernH 

 

[SteamTrain]

Wait....was that $23000 an actual "extension" payment?

An "Extension" payment last April should have been against 2023 taxes, not 2024 taxes.

Not sure that any extension payment in April of 2024 would be applied against 2024 taxes back then since extension payments were only for taxes due on a 2023 tax return.