Why did TurboTax not calculate VA state tax underpayment penalty on form 760C

[whiteryder]

I did my taxes with TurboTax, just like I have for many years.  I efiled as usual.

Couple of weeks later I checked my VA tax account on their website, and it showed I still

owed another $112.  They had accepted my return and the amount TT said to send them,

but had a different number for Tax Due.  The reason stated was that there was no calculation

of underpayment penalty (I assume the implication is that they calculated it for me, and added

it to my balance due).

I don't know whether I hit a bug in TT, or if my "choose what I work on" method of using TT

introduced this error, but VA is right - form 760C is only partially filled out in the return filed.

I am not a tax expert; every year I count on TT to get it right even if I can't explain it myself.

When repeated reviews and accuracy checks tell me my return is correct, eventually I have

to trust it and file the return.

For the time being, I have assumed that VA is correct for 2025, and have paid the balance due. 

But I need to make sure that in the future this calculation gets done.  What can I do to trigger

this form to get completed?

[baldietax]

what do you mean by "partially filled out", what was missing?

at the end of the tax interview flow for Virginia there is a final screen "a few things to wrap up" etc and on that screen is an interview section for underpayment penalties where you can go through AI method or validate 2024 tax info which affects the underpayment calculation.

[whiteryder]

Yes I've seen mention of the underpayment button under states.  But when I open TT and go to 

"other tax situations" it shows a button for next year's estimated tax, but nothing for underpayment

of this year's (2025).

[whiteryder]

In answer to your other question:

     Form 760C is filled out for section I, lines 1-8 and 10.  

     Line 11 and the rest of the form is empty.

Since line 11 is the underpayment amount of each estimated tax payment,

and it is empty, I imagine TT would conclude that there was no underpayment

and thus no penalty to calculate.  But I don't know why the form wasn't finished.

Unless TT is correct, and VA Tax dept is wrong about whether I owe the penalty.  (!)

And I don't know enough about this topic to answer that myself.

[baldietax]

So it seems if TT determines you don't owe a penalty then the Underpayment Penalties section won't be displayed at all under the wrap up section, also I don't think the 760C will be filed with your return (similar to Form 2210 is not filed for Fed even if you have a penalty, unless you have an exception like AI method).

Not to discount possibility that Turbotax made a mistake, but it likely determined no penalty was due based on the information it had.  I am assuming VA, like Fed, will independently calculate whether a penalty is due and then bill you later.  But they are using "their" records for 2025 tax, 2024 tax and your estimated tax payments.  So if there was any adjustment to your 2024 tax or other issue carry over the 2024 data to TT 2025 (760C Line 3), or an adjustment by VA to 2025 tax (Line 1), or the dates or amounts of estimated tax payments you entered don't match what state knows (Line 10)... then VA will come to a different conclusion.

The calculation itself is fairly straightforward - you need to have paid either 100% of 2024 tax or 90% of 2025 tax  whichever is smaller (Line 4 - this is your 'safe harbor') and it's assumed your income is earned evenly and tax due needs to paid evenly thru the year, so divide that by 4 (Line 7).  Then lines 8-11 line up withholding (assumed even per quarter) and estimated taxes (based on actual payment date) per quarter to determine under/over payment.

Hope that helps - hopefully you may be able to figure out why Turbotax and VA came to a different result.