Distribution of Withholding Tax over time

Forum|Forum|2 years ago
March 9, 2024
1 reply
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When a financial institution withholds Federal and State tax throughout the year, does TurboTax distribute that withheld amount evenly throughout the year? Of course, the 1099 received from the financial institution does not specify when the tax was actually withheld.

If the institution waited until December, for example, to withhold the entire annual amount, how would you enter that in TurboTax to allow TurboTax to determine the penalty incurred for the late tax withholding payment? Or is the financial institution bound by a government regulation to distribute the withholdings evenly? Otherwise, how would you know the institution did that?

TurboTax Home & Biz Windows

Best answer by fanfare

The default penalty calculation is to apply all your withholding as four equal payments, even if only one withholding event occured.

The Form 2210 Box D option lets you enter tha actual quarters your withholding was taken.

This might reduce your penalty.

If your institution sent you 12 checks one per month with withholding (for example) Box D won't help you.

@Frank nKansas

MonikaK1

If TurboTax is showing an underpayment penalty on your return, visit or revisit the Underpayment Penalty section under Other Tax Situations and answer the interview questions. The penalty calculation may change based on your answers, including information about when your withholding was applied. In addition, if you believe you qualify for a waiver of the penalty, you can request a waiver in that section.

The IRS may reduce an underpayment penalty if any of the following apply:

You or your spouse (if you file a joint return) retired in the past 2 years after reaching age 62 or became disabled and you had reasonable cause to underpay or pay your estimated tax late. See Waiver of Penalty in Instructions for Form 2210PDF.
You had most of your income tax withheld early in the year instead of spreading it equally through the year.
Your income varies during the year. Complete Form 2210, Schedule AI, Annualized Income Installment Method PDF(found within the form).

The penalty for underpayment of estimated tax can also be removed to the extent that the underpayment is the result of a casualty, local disaster, or other unusual circumstance such that it would not be fair to impose the penalty.

See here for information about different TurboTax tools you can use to calculate withholding and estimated taxes.

See this TurboTax tips article for more information about Form 2210.

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