Still being assessed underpayment penalty when though I paid nanny taxes.

Forum|Forum|1 year ago
April 13, 2025
1 reply
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I've seen a lot of posts where people have complained about Turbotax not reconciling the employer taxes the users have already paid for their nanny's wages with what is getting reported in schedule H. I have followed the instructions to enter in the taxes already paid under "Estimated Taxes". Doing this seems to mostly negate out any taxes owed, however, Turbotax is still assessing that I have an underpayment penalty of $840... then increases it to $940 when I say I will pay by the filing deadline. It seems that that there is still a disconnect in Turbox between recognizing that the estimated payments made with what is being reported in the schedule H.

One more note, mathematically, it seems that TurboTax is implying that I under paid taxes by $63 (after I enter in my state unemployment tax payments already made). Not sure how accurate that is, or if that actually warrants an underpayment fee 13-15X the amount that is due?

TurboTax Premier Online

JohnB5677

Here are the rules for the income tax penalty. It doesn't involve the Nanny tax, however that may cause a penalty of it's own.

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.

Underpayment of Estimated Tax by Individuals Penalty

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sjbakAuthor

Based on what you are saying

1) I should not be paying an underpayment fee.

If the Turbotax calculation is correct, I've paid 98% of my owed nanny taxes

2) Turbotax then is clearly is assessing my penalty based on what it thinks I have not paid on my nanny taxes, and is not connecting that the estimated taxes I paid are for the nanny tax.

Amending my W4 would do nothing to solve this now or in the future, as that's based on adjusting my personal income taxes withheld, not what I am withholding from my nanny as the employer or what taxes I've already paid as the employer of my nanny.

I am still in the same boat... Turbotax is having me pay a an underpayment fee for something I've already paid.

BrittanyS

Did you choose the annualized adjusted gross income method. If you are entering different amounts in each quarter, or leaving a quarter off, it can flag and give the error. Go back in the program until you see "Annualized Income Method" and select yes.

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