Why is overpayment different from Amount Refunded or Applied to 2021?

[paddams]

Overpayment of tax is $2243, yet TT fills in $2232 as amount refunded or applied to 2021. Where did the $11 go? Not a big deal but frustrating to this logical person that I can't find why $11 disappeared. Double click on the forms leads to Estimated Tax form that has $2232 already filled in, not $2243.

[SteamTrain · Accepted solution]

Even with a refund...there can be a penalty.

Any $$  ( $11 ) on line 38 of the form 1040 ?

[paddams]

Yes, line 38 is an estimated tax penalty. Funny, I only had W-2 income last year aside from a modest amount of investment income. How is the estimated tax penalty calculated? Seems if I have $2K being refunded/credited to 2021, you wouldn't think I underpaid whatsoever. We only had $16K in earnings that didn't have tax withheld. My Excel spreadsheet for quarterly estimates seemed to show a shortage so I paid nearly $10K in estimated tax. I guess I'll sift thru Turbo Tax again and perhaps it will explain the penalty. What am I missing? Thanks.

[VolvoGirl]

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.  

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.

[paddams]

I went to Federal > Personal > Other Tax Situations > Underpayment Penalties. I answered the questions and it asked me to annualize my income. I did so, and immediately the $11 showed as a refund. The questions got cumbersome so I backed out, figuring I could find somewhere to tell TurboTax to add the $11 to the $2232 to be applied to 2021 taxes. Suddenly, I see instead of $11 refund, I owe $276! What happened? I hate TurboTax. I even quit without saving but when reopened I still owe $276. I hate TurboTax. And it's the best software, right?

[paddams]

I deleted Form 2210, so I'm back to $11 penalty.

[VolvoGirl]

Thats weird.  Do this......

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.

[paddams]

When TT asks about annualizing income - it says put your AGI for 1/1-3/31, then 1/1-5/31, then 1/1-8/31, and finally the whole year. How do you figure your AGI? I put in my wages for each of those periods, and that's when the $276 owed showed up. And if I check box C and let the IRS figure my tax penalty - that could open a whole can of worms. What if they decide I owe more? How could I ever get in touch with the IRS? I've been down that road before. Better to suck up $11. I guess instead of putting the proper number of exemptions on my W-4s, I will need to reduce that number. I thought I had already done that. Of course, trying to see one's W-4s seems to be next to impossible.

[paddams]

I'm examining form 2210. It says multiply 2020 tax liability by 90%. Then it asks how much fed tax withheld and specifies not to include estimated payments. Why wouldn't you? There is $18K or so of investment income that doesn't have taxes withheld. So, shouldn't I be making estimated payments. Fail to understand why they aren't counted against the 90% full tax which is based on W-2 income and investment income.

[SteamTrain]

@paddams 

Opinion:   the details needed to prepare the 2210/2210AI for Annualized Income can get messy.  Just delete the 2210, and leave the penalty in there.

You've already spent more time, energy and frustration than the $11 is worth.  I've only used the forms once ~18 years ago...and since then have had a couple of similar penalties due to unexpectedly large late year Mutual Fund distributions.  I won't bother with the 2210AI again until the penalty gets up to somewhere above $50.