Underpayment penalty screen

Forum|Forum|1 year ago
April 9, 2025
3 replies
0 views

This year is the first time I noticed this screen. Any idea where to start looking at what I means ?

Underpayment Penalties

You have a penalty of $91 for underpayment of your estimated taxes. The balance due on your return includes this penalty.

Ask the Experts - Tax Due - April 2025

VolvoGirl

Employee

Do you have a penalty on 1040 line 38? It's not for filing or paying late. It doesn't have to do with last year's tax return or not paying estimates for this year. The penalty is an "estimated" amount. It's a penalty if you owe too much or for not paying in enough withholding during the year or not paying in evenly. Even if you are getting a refund you can still owe a penalty. It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

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

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

@Rockpowwer

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

RockpowwerAuthor

Thanks. I’m starting to go over the interview inside that section and it’s definitely a bit above my head for now. But the goal was to just understand where it came from. Like was it just the w2, or after adding business income, or maybe it knows about k1s from last year (I’ve yet to add any k1 for the current period).

DawnC

Employee

Given only the information you entered so far, you did not pay enough estimated taxes for your business income or did not have enough withholding taken out during the year by your employer. Did you pay any estimated taxes for your business income? Don't worry about the penalty section until you have everything entered as the amount will likely change as you add information. If you did make estimated payments and need to enter them, see this TurboTax FAQ

It is dependent on your income and timing of your tax payments/withholdings. The IRS levies underpayment penalties if you don't withhold or pay enough tax on income received during each quarter. Even if you paid your tax bill in full by the April deadline or are getting a refund, you may still get an underpayment penalty.

Example from this TurboTax FAQ: Taylor is self-employed and estimated next year's tax bill at $20,000. Rather than making 4 quarterly payments of $5,000 each, they chose to pay $500 in each of the first 3 quarters, and the remaining $18,500 in the fourth quarter. When they filed, their actual tax bill came to $17,270 and they got a $2,730 refund. However, Taylor got hit with the underpayment penalty, because they underpaid their estimated tax in the first 3 quarters. More on Underpayment Penalties; Topic 306.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

RobertB4444

Penalties are based on your prior years' taxes. If you owed $3,000 last year and then you owe $3,000 again this year then you're going to get charged a penalty. The IRS sees that as money that you should have paid in estimated payments because - since you owed it last year - you should have known that you would owe it again. And they expect to be paid not when your tax return is due but when you earn the money just like with withholding from a paycheck.

So if you owed last year and then owe again this year - no matter what revenue stream caused you to owe the money - there will be a penalty generated by the system.

@Rockpowwer

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

RockpowwerAuthor

The problem is that I did not owe last year. 2024 is the first tax year with business revenue (no net income). So I guess I am still confused. From prior years there was no underpayment penalty and W2 was fixed as well 😞

SharonD007

After going through the Underpayment Section in TurboTax, if you still show an Underpayment Penalty, you can contact the IRS to request a one-time abatement of your underpayment penalty. For individual tax returns, call 1-800-829-1040, 7 AM - 7 PM Monday through Friday local time.

For more information, refer to the TurboTax help article Guide to IRS Tax Penalties: How to Avoid or Reduce Them for tips to use in the future.

@Rockpowwer

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"