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Penalty on estimated payment

Forum|Forum|5 years ago
February 1, 2021
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I sold a rental house in Dec of 2020. At the time of sale I paid an estimated state tax. The only place I can see to enter this is in the estimated taxes section, but when I do this it says I owe a penalty (presumably because the entire payment wasn't made until the 4th quarter, when the house was sold). How do I rectify this?

TurboTax Home & Biz Windows

Best answer by MAK70

You can use the Annualized Income Installment Method.

If you don’t receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method.

In Turbo Tax, look for the screen that says "Possible Penalty Exception" - go through and answer the questions and TurboTax will create the forms needed to report to the IRS to have the penalty removed.

M

MAK70Answer

You can use the Annualized Income Installment Method.

If you don’t receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method.

In Turbo Tax, look for the screen that says "Possible Penalty Exception" - go through and answer the questions and TurboTax will create the forms needed to report to the IRS to have the penalty removed.

K

kristinelise57Author

I have to say this was very confusing in TT (I thought the program was supposed to take me through things clearly, step by step!). I think I finally got it fixed by annualizing the income. Thanks.