Why am I getting a penalty for not paying estimated taxes on original 2023 quarterly due dates?

Forum|Forum|2 years ago
April 7, 2024
1 reply
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Tax filing for 2022 as well as tax estimates for 2023 were deferred to October 16, 2023, due to California natural disasters. This is for both Federal (1040ES) and California State (540ES). So, then why is TurboTax 2023 (Premier) charging me penalties for paying Q1/2/3 2023 estimated taxes on 10/16/2023?

TurboTax Online

M

MonikaK1

If a penalty for underpayment of estimated taxes is calculated by TurboTax, and you paid estimated tax within the extended time period for California disasters:

Visit or revisit the Other Tax Situations section and review the Underpayment Penalty information to confirm it is correct. Go through the interview and follow the prompts; when you get to the Penalty Waivers screen, answer "yes" if you qualify for a disaster exception, then "yes" at the next screen to request a waiver of the penalty, in all or part. Enter the reason in the field provided.

If you live in a federally declared disaster area and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty.

See here for the IRS requirements for the California disasters for 2023.

If you get a notice from the IRS proposing to assess the penalty, see this IRS webpage for guidelines and next steps.

Because the Federal and state extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations during specified dates, the deadlines themselves aren't updated in the software. The tax agencies made an administrative decision not to impose the penalties, but since the law itself didn't change, tax software including TurboTax still calculates the penalties.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

See here for related information from the California Franchise Tax Board.

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K

kmd11Author

Employee

This doesn't make sense. TurboTax software knows my address and that I live in an affected California county. TurboTax should then be able to ignore the late penalty for estimated tax payments per IRS and CA Franchise Tax board revised estimated tax due dates for 2023. This issue is going to cause a lot of TurboTax users to pay a penalty due to late estimated taxes when they don't need to be paying a penalty. The reality is that in 2023 for certain CA counties, estimated tax was not due until 11/16/2023 for the first three quarters of the year. This is true for FED and CA, and TurboTax can and should be updating their software accordingly and not splitting hairs over what's ongoing law vs. a revised due date for a particular year. Dates could change year to year, and the software should be able to handle it.

M

MonikaK1

No, this issue won't cause users to have to pay a penalty - if the penalty doesn't apply to them because of the IRS and California administrative decisions regarding disaster relief.

Because the Federal and state extended filing deadlines are available only for individuals living in areas impacted by official disaster declarations during specified dates, the deadlines themselves aren't updated in the software. The tax agencies made an administrative decision not to impose the penalties, but since the law itself didn't change, tax software including TurboTax still calculates the penalties.

TurboTax and other software companies are obligated to follow the law. The decision to extend filing deadlines ONLY for individuals affected by a disaster doesn't change the law, so the software calculation isn't changed.

As I stated above, if the penalty is calculated (based on the law, not the disaster relief decision), you can visit the Underpayment Penalties section of TurboTax. Go through the interview and follow the prompts; when you get to the Penalty Waivers screen, answer "yes" if you qualify for a disaster exception, then "yes" at the next screen to request a waiver of the penalty, in all or part. Enter the reason in the field provided.

If you live in a federally declared disaster area and met the special filing and payment deadlines for that disaster, you qualify for an automatic underpayment penalty waiver. Even if the penalty is calculated on the return, the IRS should not charge the penalty.

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