Underpayment penalty safe harbor

[jazzman42]

Used TT Premier for my 2018 returns. It was an unusual year because we sold property that produced a big taxable gain.  Total tax was $40,247 and TT had us make four estimated payments for 2019 of $723 each which we paid when due.  Now on our 2019 returns, our tax is $6,245 less our estimated payments of $2,892 for a balance due of $3,446. BUT, TT estimates we owe an underpayment penalty of $93. Should the estimated payments that TT had us make avoid any penalty?  (Our 2018 TT instructions say " if you do not make these four estimated tax payments, you may incur underpayment penalties"  leading me to believe if we do make them we will not incur penalties).

[KathrynG3]

It depends. This article will provide steps to entering Form 2210. This is a way to report the actual 2018 tax liability and to report any change in income from 2018 to 2019.  More importantly, it provides an opportunity to report income as received per quarter if it was earned unevenly through the year.

However, when a tax balance owed is more than $1,000, then there could still be a penalty assessed.

Secondly, the estimated payments generated would have assumed the other withholdings were constant. If the actual withholdings were not at least as much as 2018, then a penalty could be generated.

Lastly, if the estimated payments were not received by the estimated due dates, there could have been some penalties and interest assessed.

The rule to prevent penalty assessment for taxpayers whose filing status is married filing jointly with AGI of $150,000 or less is: 

 Taxes must be paid through the current year to equal the lower of either

• 100% of the prior year OR
• 90% of the current year

The rule to prevent penalty assessment for taxpayers whose filing status is married filing jointly with AGI of $150,000 or more is: 

 Taxes must be paid through the current year to equal the lower of either

• 110% of the prior year OR
• 100% of the current year