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Question on Underpayment Penalty.

Forum|Forum|1 year ago
February 17, 2025
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Hello, I am subject to Underpayment Penalty and I receive W-2 so there is no tax I owe (something that I must report on my own). I've read posts about Underpayment Penalty so I get the concept what it is but the question is why I am subject to it when I am trying to file 2024 tax return? I paid my due before April 2024 (For 2023 Tax Return) and for the first time the tax return had Form 1040-ES Payment Voucher within the tax return. It basically says voucher tax payment in four payments (due 4/15/24, 6/16/24, 9/16/24, and 1/15/25) and is the underpayment penalty due to not paying the tax owed each quarter? I mean.. I paid the whole tax due amount when I filed my tax return around 02/2024 time frame. Could someone explain this please?

Best answer by fanfare

Thank you for your response but I still don get it. what do you mean by I did not pay the estimated quarterly taxes when they were due? Let's say I was due $1700 last year (2024 tax return) and paid the whole amount when I filed the tax return (Feb 2024).

Are you saying since my tax owed to fed was greater than$1,000 on 2024 tax return, I should've filed 1/4 amount of $1700 every quarter throughout the 2024 year?

If so, I should've paid the estimated tax ahead of the actual tax filing in Jan-Apr 2025 period?

Jan 15th, 2025 is the last of four payments for 2024.
April 15th is Tax Day for 2024.

April 15th 2025 is also the due date for the first Estimated Tax payment for 2025.

If you have a refund and apply some of your refund to next year, that is considered to be your first estimated Tax payment.

The pament is 1/4th of your total tax, not 1/4th of the amount you owe on April 15.

if you are a regular W-2 employee subject to withholding, that takes the place of Estimated Tax payments.

@herrd89

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herrd89Author

Also I checked my IRS page and I don't owe any due (obviously, because I paid the total due amount when I filed my tax return)

SharonD007

The federal tax system is a pay as you go system. As you make money, you have to pay taxes on that money. You may have an underpayment penalty if you didn't have enough taxes withheld from your income throughout the year.

You can get hit with an underpayment penalty in the situation you described because you didn't pay the estimated quarterly taxes when they were due.

You can contact the IRS to request a one-time abatement of your underpayment penalty. For individual tax returns, call 1-800-829-1040, 7 AM - 7 PM Monday through Friday local time.

For more information, refer to the TurboTax help article Guide to IRS Tax Penalties: How to Avoid or Reduce Them.

Review ‌IRS topic 306, Penalty for underpayment of estimated tax for additional information. Also, review the TurboTax Help article Why am I getting an underpayment penalty?

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H

herrd89Author

Thank you for your response but I still don get it. what do you mean by I did not pay the estimated quarterly taxes when they were due? Let's say I was due $1700 last year (2024 tax return) and paid the whole amount when I filed the tax return (Feb 2024).

Are you saying since my tax owed to fed was greater than$1,000 on 2024 tax return, I should've filed 1/4 amount of $1700 every quarter throughout the 2024 year?

If so, I should've paid the estimated tax ahead of the actual tax filing in Jan-Apr 2025 period?