Am I facing an underpayment penalty if my tax this year is $1,285 but I received a refund of $1,918 last year? In other words, I didn't expect a tax liability this year of $1,285.
DonB
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No, one of the exceptions to the underpayment penalty is that you did not owe any taxes last year.
If you happen to owe again next year and do not make payments of at least $1,285 this year if you owe more than that or 90% of what you owe if you owe less than that, then you would have a penalty next year.
No, one of the exceptions to the underpayment penalty is that you did not owe any taxes last year.
If you happen to owe again next year and do not make payments of at least $1,285 this year if you owe more than that or 90% of what you owe if you owe less than that, then you would have a penalty next year.
if you had a tax liability in 2020 (line 24) and if you had neither withholding nor estimated tax payments you would owe a penalty because you owe more than $1000 for 2021
on form 2210 you can request first-time penalty abatement PART II box A - it is up to the IRS to agree or disagree.
I have accepted your answer as the best answer to my question. However, if I interpret your answer correctly, the only way I can be assured that I am not penalized next year if I fail to make an estimated tax payment this year, is to be sure that I withhold an amount that ensures I get a refund next year which is not easy to do.
Mike, I received a refund of $1918 for the tax year 2020 as I mentioned in my question.
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