Why am I getting an underpayment penalty when I pay what Turbo Tax tells me to pay in full every year. I do not pay my taxes quarterly.

[elizabethwebster]

Does an underpayment penalty mean Turbo Tax made a mistake?

[ThomasM125]

Your estimated taxes would have to be paid in quarterly to avoid a penalty for late payment of tax in most instances. If you had gone through the estimated tax routine in the Other Tax Situations section of TurboTax, you would have generated estimated coupons on Form 1040-ES that would have the quarterly due dates listed on them.

You can learn more about estimated taxes here:  Estimated tax

[VolvoGirl]

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, 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. It is included in your tax due or reduces your 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