I am being asked to pay an underpayment penalty for estimated taxes. I do not estimate my taxes. My pension takes out federal taxes each month with my pension check.

If you are being asked to pay an underpayment penalty, it is because you are not having enough withheld.  This means, you would need to contact your Pension Administrator to request more money withheld or if you are getting SS, you can have taxes withheld from your SS check.

 If you are seeing a penalty, you can go back into the program under Other Tax Situations>>Additional Tax Payments>>Underpayment penalties and select start or update next to Underpayment Penalties. These questions are meant to help you apply for the exemption to the penalties.

Some exceptions to the penalty are 

• You had $0 tax liability in 2022
• You paid 100% of your 2022 tax liability
• You paid 90% of your 2023 tax liability 
• 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

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