underpayment of estimated tax

Forum|Forum|1 year ago
April 8, 2025
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How can I figure out how I incurred the underpayment of estimated tax penalty? I have been self-employed for three years now and have done everything the same. I'm not sure why this is the first year for the penalty??? If anyone can assist, I would appreciate it!

VolvoGirl

Employee

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. The penalty is an Estimated amount. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. It is included in your tax due or reduces your refund.

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

stacey10lynnAuthor

Thank you SO much for your reply! I am still confused, however, because when I go to "Other Tax Situations"- it actually says that based on my entries, I don't have a penalty for underpayment. BUT then when I am looking at my state (Michigan) return, it is showing $1679 as my underpayment of estimated tax.