Can I avoid underpayment penalty after forgetting to update tax withholding elections following divorce?

8 You might be able to avoid the underpayment penalty even in this situation. The IRS has a few exceptions that could help you out. First, check if you qualify for any of these safe harbors: 1) If your withholding and estimated payments cover at least 90% of your current year tax liability, or 2) If they cover 100% of your prior year's tax liability (110% if your AGI was over $150,000). There's also a special rule if your tax situation changed suddenly during the year - which divorce definitely qualifies as! Look into Form 2210 "Underpayment of Estimated Tax." You can request a waiver of the penalty due to casualty, disaster, or other unusual circumstances if you can demonstrate reasonable cause. Major life changes like divorce can sometimes qualify as unusual circumstances, especially if this is your first time underpaying. As for audit risk - underpayment penalties by themselves don't typically trigger audits. The IRS understands life changes happen. Just make sure everything else on your return is accurate and well-documented.

12 I went through something very similar last year after my separation - totally messed up my withholding and owed a bunch. I found this tool called taxr.ai (https://taxr.ai) that was super helpful for figuring out the penalty situation. It analyzed my tax documents and helped me understand exactly where I stood with potential underpayment penalties. Their system scanned my prior year returns and current pay stubs to help me figure out if I qualified for any of the safe harbor provisions. It also walked me through documenting my "unusual circumstances" case for requesting a penalty waiver. Saved me a ton of stress trying to figure it all out myself.

7 Just wanted to update everyone - I decided to try taxr.ai after seeing it mentioned here and I'm really glad I did! My situation was almost identical (divorce last year, totally messed up withholding). The site analyzed my documents and found that I actually qualified for the 90% safe harbor since my final quarters had higher withholding. It also walked me through completing Form 2210 with the right annotations for requesting a waiver based on "unusual circumstances" - specifically citing my divorce as a qualifying life event. Just got confirmation that my penalty was waived completely! Would have never figured this out on my own.

15 I had a similar issue last year and couldn't get clear answers from the IRS. Spent DAYS trying to get through on their phone lines. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of waiting for hours or getting disconnected. The agent was able to tell me exactly what documentation I needed to submit with my waiver request and confirmed that divorce definitely qualifies as an unusual circumstance for Form 2210. They even noted it on my account that I had called about this issue. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Instead of guessing or getting conflicting advice online, I got official confirmation directly from the IRS about my specific situation.

20 I have to eat my words here. After posting my skeptical comment, I figured I'd try Claimyr since I was getting desperate about my own underpayment issue. Not only did I actually get through to the IRS in about 15 minutes, but the agent confirmed that I could qualify for a waiver due to "unusual circumstances" and walked me through exactly how to document it on Form 2210. They told me specifically which box to check and what supporting statement to include. The agent even gave me her ID number to reference if there were any questions about my waiver request. Honestly shocked that this actually worked when I'd been trying for weeks to get answers.

17 Just a heads up on those underpayment penalties - they're actually calculated quarterly, not just on your total annual underpayment. Form 2210 breaks down your tax liability into 4 payment periods. If your divorce happened mid-year, make sure you note WHEN the change occurred since that can affect how the penalty is calculated. You might only have penalties for quarters after the divorce if your withholding was on track before that.

11 Does anyone know if the recent tax law changes affected the underpayment penalty thresholds at all? I thought I read something about them being more forgiving for 2024 taxes.

I'm going through something similar right now - divorced last year and completely missed updating my W-4. The quarterly penalty calculation mentioned above is spot on and really important to understand. One thing I learned from my tax preparer is that you should also check if you had any major changes in income during the year, not just withholding. If your income dropped significantly after the divorce (like losing a spouse's income or changing jobs), that can actually work in your favor for the safe harbor calculations. Also, don't forget to update your filing status to single or head of household if you have kids - that alone might change your tax liability enough to affect whether you even owe a penalty. The IRS is generally pretty reasonable about life changes like divorce as long as you document everything properly on Form 2210.