Was the Underpayment Penalty in TurboTax calculated incorrectly in 2018? I received a check back from IRS for my Underpayment Penalty.

[VolvoGirl]

Turbo Tax only calculates an Estimated amount.  It's common and expected for the IRS to bill you for more or send a refund.  And it's also based on exactly when the IRS gets your tax due payment which Turbo Tax won't know.

[VolvoGirl]

Next year if it shows up on your return 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

[dmertz]

On March 22, 2019 the IRS announced additional relief for taxpayers who payed only between 80% and 85% of their tax liability.  If your underpayment fell in that range and you filed before TurboTax was updated to reflect the additional relief, TurboTax might have calculated a penalty that you ultimately did not have to pay.

https://www.irs.gov/newsroom/irs-expands-penalty-waiver-for-those-whose-tax-withholding-and-estimate...

[minnbiz]

In my TT Deluxe, there is only "Continue" and "Back" - I cannot enter last year's tax liability to show I withheld over 100% of that amount.  So I am stuck with a $104 penalty that I believe is not proper.

[dmertz]

Revisit the section Other Tax Situations -> Underpayment penalties.  There you will be able to enter last year's tax liability for Form 2210 purposes.

[Critter]

If you transferred in last year's information then the info needed for the form 2210 would already have been taken into consideration so no other entries would be required.  Please review the form 2210 in the PDF file. 

It is possible that you will need to use  the 2210AI  form to get rid of the rest of the penalty. 

[dmertz]

If all of the taxes paid were via tax withholding and none by estimated tax payments, annualizing will not be of any benefit.  Also note that over a certain amount for last year's AGI the amount needed to qualify for the safe harbor is 110% of last year's tax liability.