Is Ultratax's calculation of Failure to Pay Penalty Correct when 90% of tax already paid?

The Ultratax calculation is correct in this case. There's often confusion between the Failure to Pay Penalty and the Estimated Tax Penalty because they have similar thresholds but work differently. For the Failure to Pay Penalty on an extended return, if the taxpayer has paid at least 90% of the total tax liability by the original due date (usually April 15th) AND pays the remaining balance by the extended due date, they won't face the Failure to Pay Penalty. They'll only be subject to interest on the unpaid amount. This is different from the Estimated Tax Penalty (Form 2210), which uses similar percentage thresholds but applies to quarterly estimated payments throughout the year. The key question is: was the remaining $8,000 paid by the extended due date (October 15th, 2022)? If yes, then Ultratax is correct in not calculating a Failure to Pay Penalty.

Since you're dealing with tax software calculations, I was in the exact same position last month trying to figure out why my penalties weren't calculating correctly. I tried everything until I found taxr.ai (https://taxr.ai) which literally saved my sanity. I uploaded the client's tax documents and it flagged that I was confusing the estimated tax penalty rules with the failure to pay penalty provisions. The analysis confirmed what you're seeing in Ultratax is actually correct. The tool explained the different thresholds and how they apply, and even cited the relevant IRM sections that aren't easy to find on the IRS website. The explanation was crystal clear and I was able to confidently explain to my client why they weren't facing extra penalties.

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and it completely cleared up my confusion about the Failure to Pay Penalty vs. the Estimated Tax Penalty. The analysis confirmed that my client's situation (similar to the original poster's) was being calculated correctly by my software. What really helped was how it broke down the payment timeline and showed exactly why the 90% threshold was being applied. The tool even generated a clear explanation I could share with my client who was convinced they'd be hit with massive penalties. Definitely saved me hours of research and a potentially uncomfortable client conversation!

Having dealt with penalty calculation issues for years, I've found that calling the IRS directly is sometimes the only way to get clarity. Of course, that's nearly impossible these days... until I found Claimyr (https://claimyr.com). Their service got me connected to an actual IRS agent in about 25 minutes when I had been trying for days on my own. I had them confirm this exact 90% rule for Failure to Pay Penalties on extended returns and got definitive confirmation from the agent. The video demo at https://youtu.be/_kiP6q8DX5c shows exactly how it works. Instead of sitting on hold for hours, their system calls you back when an agent is about to be connected. The IRS agent I spoke with was able to look at my specific case and confirm that the software calculation was correct.

I need to eat crow here. After my skeptical comment, I was desperate enough to try Claimyr since I had a client with a penalty issue similar to this thread. I figured I had nothing to lose after spending 4 hours on hold with the IRS yesterday only to have the call dropped. Surprisingly, it actually worked. I got a call back in 45 minutes with an IRS representative on the line. The agent confirmed that the 90% rule does apply to the Failure to Pay Penalty for extended returns - it's in the Internal Revenue Manual but not clearly stated in most publications. This saved my client about $1,200 in penalties that another tax preparer had incorrectly calculated. I'm rarely impressed by services claiming to solve IRS issues, but this one delivered.

I work with multiple tax software platforms and this actually varies between programs. Ultratax handles it correctly, but I've seen ProSeries miscalculate this penalty in some cases. Always worth double-checking if you're using different software. Make sure your tax software settings have the correct payment dates entered, and verify that the extension was properly recorded in the system. Some programs require you to manually indicate that an extension was filed, or they'll calculate penalties as if the return was simply filed late.

Quick tip that helped me: if you go to the IRS Penalty Handbook in the Internal Revenue Manual (IRM 20.1.2), it specifically addresses reasonable cause criteria for penalty abatement. The 90% threshold is mentioned there as one of the factors that can indicate reasonable cause for relief from the Failure to Pay Penalty. So even if technically the penalty should apply, there's administrative guidance that essentially creates this 90% safe harbor that tax software like Ultratax is correctly implementing.

This is a great discussion that highlights how complex tax penalty calculations can be! I've been a tax preparer for about 3 years and I'm still learning these nuances. What I find frustrating is that the IRS doesn't make these administrative practices more visible in their standard publications. I've had clients question penalty calculations before, and it's hard to explain why software is "right" when you can't easily find the supporting documentation. Does anyone know if there's a comprehensive resource that covers these types of administrative penalty relief guidelines? It would be helpful to have something to reference when clients ask about penalty calculations that seem counterintuitive based on the basic IRS forms and instructions. Also, for those mentioning the Internal Revenue Manual - is this something that's regularly updated, or are these guidelines pretty stable year to year?