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Why would we have to pay a penalty tax if we paid in last year?

Forum|Forum|2 years ago
April 12, 2024
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TurboTax Deluxe Online

Best answer by VolvoGirl

That's not for filing or paying late. And is not about last year.

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. 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.

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

P

PaulaM

Employee

Underpayment penalties are calculated anytime that you do not have enough taxes withheld per each quarter. Wages for most people makes up the majority of the quarterly amounts, but you must include other types of income such as what you have included above.

You can avoid an underpayment penalty for next tax year by completing the estimated tax section and paying quarterly, or complete a new W-4 form withholding more taxes, then give to your employer.

See How does TurboTax calculate my estimated tax payments? for how estimated taxes are calculated and what you as a highly compensated employee should look out for.

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VolvoGirlAnswer

Employee

That's not for filing or paying late. And is not about last year.

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. 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.

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