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NJ_Devils
February 4, 2024
Solved

Should I ask for underpayment penalty waiver?

  • February 4, 2024
  • 1 reply
  • 0 views

I owed taxes on my Federal taxes for 2022, and I paid them without any underpayment penalty. This year, Turbotax indicates I might owe an underpayment penalty. 

 

Part of the reason is that I got some shares that vested this year, which bumped up my W2 wages. This is my first ever vesting so I didn't know about this. Should I claim a waiver for an underpayment penalty based on my first ever experience with vesting? or is this just going to create more problems for me?

 

Also, I have zero allowances on my W4 so I don't know what I can do to avoid this underpayment in the future?

    Best answer by Mike9241

    Evidently your employer did not take out enough withholding to cover all the taxes on additional income from the vesting.

     

    I doubt you have reasonable cause. you can try  these options to see if your penalty is lower

     

    1) annualized income page 3 of 2210

    2) actual withholding for each period rather than the default of 25%

    3) both 1 and 2

     

    the simplest way to avoid penalties for 2024 is to have your withholding equal 100% of your 2023 tax. it's 110% if your 2023 adjusted gross income is over $150K

     

    There are other ways such as withholding equal to 90% of your 2024 tax but you don't know this until you complete the 2024 return

     

     

     

    1 reply

    M
    Mike9241Answer
    February 4, 2024

    Evidently your employer did not take out enough withholding to cover all the taxes on additional income from the vesting.

     

    I doubt you have reasonable cause. you can try  these options to see if your penalty is lower

     

    1) annualized income page 3 of 2210

    2) actual withholding for each period rather than the default of 25%

    3) both 1 and 2

     

    the simplest way to avoid penalties for 2024 is to have your withholding equal 100% of your 2023 tax. it's 110% if your 2023 adjusted gross income is over $150K

     

    There are other ways such as withholding equal to 90% of your 2024 tax but you don't know this until you complete the 2024 return

     

     

     

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