Underpayment Penalties calculation

[DianeC958]

The Underpayment Penalties calculation is on form 2210.

If owed more than $1,000 when you file your tax return, you are subject to an Underpayment Penalty on the balance due.  

Here is an excerpt from the IRS -

"The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. 

If you don't pay your tax or you pay an insufficient amount of tax through withholding, you might also have to pay estimated taxes. 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."

If you have been assessed an underpayment penalty, then you can see if you may qualify for an exception to the penalty.  You may want to look into these exceptions if this is the first year you owed tax and it is not a normal occurrence (i.e. you had one time income this year).

"Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, 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."

You can review your underpayment penalty by going to

• Log in and click Take Me to My Return
• Click Federal Taxes 
• Select Other Tax Situations
• Scroll down to Additional Tax Payments
• Click start/edit next to Underpayment Penalties 

[rajulshah]

My federal tax withholding in 2019 was more than 110% of the total federal tax liability in 2018. This meets the IRS requirement for avoiding a penalty (for higher incomes). Yet, Turbo Tax went ahead and added a penalty. It appears the fault is with form 2210 because this rule is not baked into it; the 90% rule is.

The IRS recently sent me a check for the penalty amount plus interest! 🙂 So I got lucky but not sure about others who might be in a similar situation but the IRS didn't take notice.

This begs the question: why isn't Turbo Tax implementing the 110% rule? Or am I mistaken?   

[Critter-3]

Failure by the user to enter or confirm  the 2018 information in the program 2210 interview section will result in the program computing an incorrect amount which the IRS caught and corrected.  This  is not a program error it is a user entry error. 

[rajulshah]

Appreciate the (quick) response. Went back and reviewed my return. Noticed that my 2018 tax info was actually missing in its entirety! Somehow I managed to start my 2019 return w/o first inheriting the 2018 tax data. Been using TurboTax for nearly 20 years and never missed it. Yet another sign that I'm getting old very fast.

First thing that occurred to me was: did I miss any carryover capital losses from 2018? Sure did and just filed the amended returns.

Have to wonder if I missed anything else.

Thanks again.

[Critter-3]

@rajulshah 

Well mystery solved ... save a PDF of the 2018 return and look for the carryover information worksheet to see if anything else was missed. 

Going forward  always login using the same UserID to transfer in the prior year information ... use the current 2019 account going forward and if you have to enter in all your base info again then you are not in the same account  OR  you choose to skip the transfer function.