Why do I owe an underpayment penalty if I paid in full last year?

[Kat · Accepted solution]

The IRS expects payment on an as-you-go basis.  In other words, when you get your money, they want theirs.

So if you earned more money, for example, in one quarter of the year, the IRS expects your quarterly payment to them to reflect your increased earnings.  You can actually incur an underpayment penalty and still get a refund for the year.  The IRS wants payment on a quarterly basis.  The TurboTax FAQ I'm linking below will explain in more detail.

Why am I getting an underpayment penalty if I'm getting a refund? 

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