How did Turbo Tax figure out my estimated tax penalty on line 36 of IRS form 1040

Forum|Forum|1 year ago
February 16, 2025
4 replies
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how was the estimated tax penalty calculated

Best answer by VolvoGirl

--sorry, I meant line 38

If you get a penalty on 1040 line 38, 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.

How to add form 2210 for Underpayment Penalty
https://ttlc.intuit.com/community/tax-payments/help/how-do-i-add-form-2210/00/25703

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

VolvoGirl

Employee

You mean on 1040 line 38?

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

VolvoGirl

Employee

Or if you mean line 36 that is to apply part of your refund to next year as an estimated payment towards 2025. You will get credit for it next year. You can delete that.

Bspoe

I don't understand your response. I would like to apply 100% of my refund to next year's taxes. However, Turbotax also calculated a penalty on line 36. My estimates always exceeded what was due, hence the refund. Why do I have a penalty and how do I delete it as you suggested?

Bspoe

--sorry, I meant line 38

JohnB5677

TurboTax calculate the penalty based on:

The amount of the underpayment.
The period when the underpayment was due and underpaid.
The published quarterly interest rates for underpayments.

IRS Quarterly interest rates

The underpayment penalty will be assessed if any of these apply:

"If you don’t pay enough tax through withholding and estimated tax payments, you may have to pay a penalty."
"You also may have to pay a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return."

To avoid the under payment penalty:

The amount you owe is less than $1,000, after subtracting withholding and refundable credits.
You paid 90% of the tax that you owed for the current year.
You paid 100% of the previous year tax, (110% for higher incomes).
If your previous year's adjusted gross income was more than $150,000 you will have to pay in 110% of your previous year's taxes to satisfy the "safe-harbor" requirement.

"Typically, underpayment penalties are 5% of the underpaid amount, and they're capped at 25%.

Underpaid taxes also accrue interest at a rate that the IRS sets annually."

To avoid this situation it is recommended that you adjust your W-4 with your employer or pay estimated taxes.

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gwenblk

Turbo Tax applied a penalty although I am getting a refund?

IsabellaG

Employee

As strange as it seems, it is definitely possible to owe an estimated tax penalty even if you're getting a refund. The income tax system is a "pay as you go" system in which you are expected to pay the tax in each quarter, as you receive the income. Please see this Help Article.

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