Underpayment Penalty - More Interest earned on 1099-INT

Forum|Forum|1 year ago
February 18, 2025
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Hi,

Based on the withholding from my W2 for 2024, I don't owe any tax on my return. But, when I entered the interests I earned from my bank's 1099-INT (from CD), I end up owing over $1,200 taxes.

Does this mean it will trigger underpayment penalty for 2024 taxes?

If yes, what do I need to do for 2024 return?

If yes, what do I need to do for 2025 to avoid this happens again?

SabrinaD2

If you owe over $1,200 in taxes due to interest from a 1099-INT, it could trigger an underpayment penalty for 2024.

The IRS requires that you pay at least 90% of your current year's tax liability or 100% of your previous year's tax liability to avoid an underpayment penalty. TurboTax will calculate if you owe a penalty and guide you through completing Form 2210 for penalty,
IF you do receive a penalty: To possibly reduce or eliminate your underpayment penalty:
- Open or continue your return.
- Navigate to the underpayment penalty section:
  - TurboTax Online/Mobile: Go to annualizing your tax

For 2025, increase your tax withholding or make quarterly estimated tax payments to avoid this issue. Even if you get a refund, you may still face a penalty if you didn't pay enough tax each quarter. Follow the steps in TurboTax to reduce or eliminate the penalty.