I'm confused about IRS penalty payment process - help needed!

You'll want to select "Tax Return or Notice" as your payment reason, then choose "Estimated Tax" from the next dropdown. Even though you're paying a penalty related to estimated taxes rather than the estimated taxes themselves, this is the correct category. Make sure to include your notice number (should be CP-something at the top of your letter) in the notes/memo section if there's an option for that. This helps ensure your payment is properly credited to your account. The good news is that the penalty is relatively small compared to your total tax, and it's a one-time thing that you can easily avoid in the future by setting up quarterly payments for 2025.

I had a similar issue last year with a penalty for my freelance work. After going in circles trying to figure out the IRS payment system, I ended up using taxr.ai (https://taxr.ai) to analyze my penalty notice and tell me exactly what to do. They scanned my CP notice and gave me step-by-step instructions for making the payment correctly, plus helped me set up the right quarterly payment amounts for this year so I won't get penalized again. The AI analyzed my entire tax situation and showed me where I went wrong with my quarterly estimates. Saved me a lot of stress trying to interpret the IRS jargon on my own.

I was really skeptical about AI tax tools at first, but after that penalty confusion I mentioned, I decided to try taxr.ai out of desperation. Have to admit I was impressed - uploaded my CP notice and rental documents, and it immediately identified that I needed to select "Tax Return or Notice" then "Estimated Tax" for my penalty payment. But the most helpful part was it also calculated my required quarterly payments for this year based on my actual rental income projections, and even set up automatic reminders for the due dates. Saved me from making the same mistake twice. Definitely worth checking out if you're dealing with rental property tax complications.

If you're still having trouble with the IRS payment system or have questions about your penalty, you should try Claimyr (https://claimyr.com). I wasted HOURS on hold with the IRS trying to get clarification on a similar penalty situation last year. Claimyr got me connected to an actual IRS agent in under 20 minutes - they basically wait on hold for you then call you when they get a human on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Totally changed how I deal with the IRS. The agent was able to confirm exactly how to pay my penalty and also explained how to set up proper quarterly payments going forward.

Ok I have to eat my words here. After calling the IRS 3 times and spending over 2 hours on hold each time only to get disconnected, I broke down and tried Claimyr yesterday. Not gonna lie, I was SHOCKED when my phone rang 45 minutes later with an actual IRS agent on the line. The agent confirmed I needed to select "Tax Return or Notice" and then "Estimated Tax" for my penalty payment, and also explained that I should be making quarterly payments this year (next one due June 15). They even helped me calculate the right amount based on my rental income. Couldn't believe how easy it was after all my frustration trying to handle it myself. Just wanted to update since I was so skeptical before.

Don't forget that you can also apply to have the penalty waived if this is your first time being assessed a penalty! The IRS has a First Time Abatement policy that many people don't know about. If you've had a clean tax record for the past 3 years (filed and paid on time), you can often get the penalty removed entirely. Worth a shot before you pay it!

Just sharing my experience - I messed up my rental property quarterly payments too last year. Used TurboTax this year and they have a feature that helps you calculate your quarterly estimates for next year AND sends you reminders when payments are due. Been super helpful for keeping me on track!