Underpayment penalty

[shroggy]

I just confirmed with the IRS that I paid my 2022 taxes in full and on time. Why am I getting this penalty on my 2023 tax return?

[VolvoGirl]

Do you have a penalty on 1040 line 38?  it's not for filing or paying late.  It doesn't have to do with last year's tax return or not paying estimates for this year.  The penalty is an "estimated" amount.    It's a penalty if you owe too much or for not paying in enough withholding during the year or not paying in evenly.  It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[DianeW777 · Accepted solution]

It depends. It is not likely that it has anything to do with your 2022 tax return.  

Reasons why a penalty could occur on your current (2023) tax return:

1. Estimated payments were made, however they were not paid on time (this can apply even if there is an overall refund on the return).
2. As an employee there was not enough withholding to cover your total tax based on the W-4 you would have completed for your employer.
3. An unexpected event occurred that gave an additional amount of income where no tax withholding was taken.

Here are the exceptions to the penalty (Form 2210 Instructions:(  

Exceptions to the Penalty: You won't have to pay the penalty or file this form if either of the following applies.

1. You had no tax liability for 2022, you were a U.S. citizen or resident alien for the entire year (or an estate of a domestic decedent or a domestic trust), and your 2022 tax return was (or would have been had you been required to file) for a full 12 months.
2. The total tax shown on your 2023 return minus the amount of tax you paid through withholding is less than $1,000. To determine whether the total tax is less than $1,000, complete Part I, lines 1 through 7.
   1. What is Form 2210?
   2. How do I preview my 1040 before filing?

@shroggy