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If you do not pay enough tax, 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
If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form. If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column. Type 2210 in the search box and open the 2210 form. Check box C to let the IRS calculate it.
pay the expected Estimated Tax and you won't be penalized.
See US Tax Code.
if your adjusted gross income for 2020 was over $150,000, then the 100% mentioned by @VolvoGirl is increased to110%. likely there's form 2210 where the penalty is calculated. there is another option that can be used to reduce or eliminate the penalty. that's in schedule AI of the form
If the previous replies show you owe a penalty, you may be able to appeal this penalty.
Appeals information is available at https://www.irs.gov/payments/penalty-relief
https://www.irs.gov/pub/irs-pdf/n1215.pdf
and
https://www.irs.gov/appeals/penalty-appeal
You can also GOOGLE irs appeal underpayment penalty
I suggest that if you owe the penalty, pay it to stop the interest growth on it, and then file the appeal and let the appeal process proceed. If you win your appeal, ask for a refund or apply the amount to next year's taxes.
Lastly, one of the factors involved in Form 2210 can be unequal income throughout the 2021 year, especially a large amount in Q3 or Q4. (The default calculation assumes approximately equal income in each quarter.) Form 2210 can adjust for this situation.
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