Question

Underpayment Tax Penalty

Forum|Forum|2 years ago
February 6, 2024
3 replies
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Is TurboTax 2023 Premier currently accurate with regards to calculating the under-payment penalty?

My total of withholding and estimated tax payments meets both the requirements for no penalty. However, the program is saying I owe a penalty.

I advanced paid more than 90% of the 2023 tax owed and in my case 110% of my tax for 2022.

Why is the program saying I owe a penalty? I can get around it if I fill out form 2210 with my variable earnings for 2023 but I should not have to do this given the fact that I meet the two general requirements for no penalty.

What is the issue???

M

Mike9241

25% of withholding is deemed paid each period but by checking box D on the 2210 you can use actual withholding for each period.

timely estimates are based on the dates you entered in the tax payments worksheet, bad dates or late payments would result in penalties being calculated. you need to check those dates and review the 2210 to see what periods are subject to penalty and what's being used for tax payments. This forum has no access to your return.

S

shuttle1421Author

That's all well and good but why doesn't TurboTax just recognize the IRS rule regarding paying at least 90% of the tax due for 2023, which I did, or paying 110% of the tax for 2022 which I did?????? That would eliminate any need to use or review Form 2210.

1

1cjones1

I too had this same issue. TT said I owed a penalty even though I am covered by the safe-harbor rules. Although I paid less than 90% of the current year's tax liability, I should have been covered by the fact that I paid at least 100% of 2022's liability (the 110% rule doesn't apply to me).

TT didn't even ask me or take into consideration what my tax liability was in 2022....

D

dhomrigh

It appears to me that only withholding, not estimated taxes, are used to determine if safe harbor is met? This is very surprising to me, but it seems to be the case (line 6 in 2210). I'm very surprised that estimated taxes don't count towards safe harbor. If someone else feels differently and can point me in a helpful direction, I'd love to hear it.

Darren

D

DB991

I agree that the way 2210 reads that line 6 defines the safe harbor cut off. But something more is happening in the background that seems to override the first pass underpayment claim. I am in the 110% safe harbor camp. My W-2 withholding for 2023 was less than 50% of my estimated tax liability, so I made 4 quarterly payments to meet the 110% level. Yet, even with this info TT showed I owed a penalty.

But when I went to "Other Tax Situations" and opened the "Underpayment penalties", I was able to answer a couple of questions and then enter my 2022 tax liability. This is the info that I was very surprised (and disappointed) that TT didn't already import nor did ask for this information before declaring I owed a penalty.

After I did this TT then said I owe no penalty.

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deci37

Is there a bug in TT? I also have an underpayment penalty. But I have done the math from last year, and I 100% paid what I owed on time. Had the correct amount withheld from my paychecks by my employer and paid the balance due when it was due. Note, taxes last year were due April 18th, not the 15th because 1) a weekend, 2) DC's emancipation day holiday. The only thing I can think of is that TT calculating a penalty based on an April 15, 2023 filing due date.

Also the information in the software to understand why one might be receiving this penalty is completely lacking, its a total black box.

D

DB991

@deci37

Did you check the 2022 tax amount paid in "Other Tax Situations"/"Underpayment penalties"? TT had mine as zero, but when I updated it to the actual amount I had paid, the penalty went away.

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deci37

Thanks DB991. Maybe second, third time is the charm?? Tried that again, and it seemed to work this time. Fingers crossed it sticks.

The first time I did that, it did not take and me to put in when I expected to pay the 2022 balance due. When entering April 18, 2023, it gave me an error saying I couldnt have a date later today's current date... head scratcher as I am pretty sure its 2024. Also tried 2022 as a payment date, got the same error so there is bug (or a few) in the date validation code and this code block.