Why do I have an underpayment penalty if my employer withheld my taxes all year?

[VolvoGirl]

You might have other income that did have withholding taken out.  Or you didn’t have enough withholding and still owe a tax due.

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

[MayaD]

You probably don't have enough taxes withheld from your paychecks. The amount of tax withheld from your paycheck depends on what you earn each pay period, and, what information you gave your employer on Form W-4 when you started working. 

Check your withholding often and adjust it when your situation changes. You can increase your withholding by filling out a new Form W-4 and giving it to your employer.

Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of 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.

Underpayment of estimated tax by individuals penalty