Underpayment Penalty? Turbo Tax tells me I may owe?

[AHHHH-taxes]

It says 'Is at least two thirds of your income from farming or fishing?'
What does this even mean? I dont fish. How do I get rid of this 'underpayment penalty' question?

[Rainman12]

Answer questions as asked. Farm/fish = No. Must be asked, because they can income average to spread tax burden. You'll get other questions to determine if penalty applies.

[FangxiaL]

If you don't have income from fishing or farming,  you answer No to that question. On the next screen, you can check to see if you qualify for an exception to the penalty. If you can answer Yes to all three questions, the process ends sooner. See the screenshot below.

Underpayment penalties are assessed if you don't withhold or pay enough tax on income received during each quarter. It is entirely possible to get hit with an underpayment penalty even though you paid your tax bill in full by the tax due date or even when you are getting a refund. 

@AHHHH-taxes

[zazapuppy]

turbo tax asked 3 questions and only answering all 3 YES can avoid penalty tax: 

- was your 2020 tax liability zero? or if you didn’t file , would it have been zero had you filed?

- was your 2020 return covering a full 12- month period? or, if you didn’t file last year, would it have covered 12 months?

— were you a US citizen or resident in 2020?

answer: 

——- i had both federal and state refunds and i didn’t have to pay tax due in 2020 and i did file my tax for covering full 12 months last year and i am a U.S. citizen. 

therefore, do i answer all those 3 questions on turbo tax YES?

[JohnB5677]

That is correct.  You should answer all three of those questions "Yes".

If you owe taxes this year the penalty may be assessed if:

• The amount of tax you paid during the tax year is less than 90% of the tax that you owed for the current year. 
• The amount you paid during the tax year did not equal 100% of your taxes owed the prior year. 
• The IRS also says you can probably avoid the penalty if the amount you owe is less than $1,000, after subtracting withholding and refundable credits.

To avoid this situation it is recommended that you adjust your W-4 with your employer, or pay estimated taxes.

[zazapuppy]

if i don’t expect any big capital gain for year 2022, can i not pay estimate payment for 2022? the reason i had $191 penalty is because i didn’t expect sale of stock to occur capital gain in year 2021,so it’s only one year situation, for year 2020 i and both refunds from state and federal , 

thanks 

[DoninGA]

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@zazapuppy wrote:

if i don’t expect any big capital gain for year 2022, can i not pay estimate payment for 2022? the reason i had $191 penalty is because i didn’t expect sale of stock to occur capital gain in year 2021,so it’s only one year situation, for year 2020 i and both refunds from state and federal , 

thanks 

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The Forms 1040-ES are for your use only.  You can use them or not, it is your choice.  

[zazapuppy]

thanks very much