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nimu_jain
New Member

When should I pay underpayment penalty for FY-2020? I have paid more than 90% of the total taxes owed. Should I be excused the underpayment penalty?

Surprisingly, turbotax has calculated me to pay a high penalty which is confusing me even more.
2 Replies
LenaH
Employee Tax Expert

When should I pay underpayment penalty for FY-2020? I have paid more than 90% of the total taxes owed. Should I be excused the underpayment penalty?

It depends. The underpayment penalty generally only applies when you owe more than $1,000 in federal tax on your tax return. Per the IRS, most taxpayers will avoid this penalty if they either:

  • owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or
  • if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

The penalty may be waived if:

  • The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
  • You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

To review your underpayment, please follow the instructions below:

  1. Open your return.
  2. Search for underpayment penalty with the magnifying glass tool at the top of the page.
  3. Select the Jump to link at the top of the search results.
  4. Review your underpayment and see if you qualify for an exception.

Lastly, you can elect to have the IRS calculate the penalty for you by following the instructions above. 

 

Topic No. 306 Penalty for Underpayment of Estimated Tax

fanfare
Level 15

When should I pay underpayment penalty for FY-2020? I have paid more than 90% of the total taxes owed. Should I be excused the underpayment penalty?

If you did not make four sufficiently large quarterly payments, that could be your problem.

Any penalty over $75 I'd consider high.

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