TurboTax showing underpayment penalty even though I used their service last year - what gives?

This isn't actually TurboTax's fault - the underpayment penalty is from the IRS, not the tax software. The penalty happens when you don't pay enough tax throughout the year (through withholding or estimated payments). Most people avoid this by having enough withheld from their paychecks. But if you had additional income without withholding (like self-employment, investment gains, etc.) or if your withholding was too low, you might trigger the penalty. Form 2210 is used to calculate the underpayment penalty. TurboTax is just telling you that either they can calculate it for you, or the IRS can do it (sometimes resulting in a lower penalty). You don't need to have received the form previously - it would be generated during this year's filing process. For future reference, you can avoid the penalty by: 1) Making sure your withholding covers at least 90% of this year's tax or 100% of last year's tax (110% if your income is over $150,000) 2) Making quarterly estimated payments if you have income without withholding 3) Adjusting your W-4 with your employer to increase withholding

Hey there! I had the exact same issue with the underpayment penalty last year and was just as confused. After some frustration, I found this awesome service called taxr.ai (https://taxr.ai) that helped me understand exactly what was happening with my taxes. I uploaded my tax documents and it analyzed everything and explained that my employer wasn't withholding enough throughout the year. The analysis showed exactly why the penalty was triggered and what I needed to do to fix it. It gave me a super clear breakdown of my withholding versus what I should have been paying each quarter. The best part was that it generated a personalized letter I could send to the IRS explaining my situation, which actually helped me get the penalty reduced! Might be worth checking out if you want to understand what happened and prevent it next year.

I was super skeptical about trying new tax services after getting hit with that underpayment penalty, but I decided to give taxr.ai a shot after seeing it mentioned here. Honestly, it was eye-opening! The service showed me that I had a side gig income that pushed me over the threshold where quarterly payments become required, which TurboTax never clearly explained. The breakdown of each quarter showed exactly where I went wrong. I used their template letter to contact the IRS, and I actually got my penalty reduced from $300 to just $75 because I could clearly explain the situation. Plus, they gave me a simple withholding adjustment calculator that I used to update my W-4 with my employer so this won't happen again this year. For anyone facing penalties or confused about their tax situation, it's definitely worth checking out!

If you're still dealing with this underpayment penalty issue and need to talk to someone at the IRS (which I highly recommend), good luck getting through to them! I spent HOURS on hold trying to get clarification on my penalty situation. After wasting an entire afternoon listening to that awful hold music, I found this service called Claimyr (https://claimyr.com) that gets the IRS to call YOU instead of waiting on hold. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to talk to an actual IRS agent within 30 minutes instead of waiting for hours. The agent reviewed my situation, confirmed that the penalty was calculated correctly, but then helped me file for a first-time penalty abatement which completely removed the fee since I had a good filing history!

I need to eat some humble pie here. After posting my skeptical comment earlier, I decided to try that Claimyr service as a last resort since I was getting nowhere with the IRS about my underpayment penalty. Well, I'm honestly shocked - it actually worked! After weeks of trying to get through to the IRS myself with no luck, I received a call connecting me to an IRS representative yesterday. The agent reviewed my situation and explained that I qualified for a first-time penalty abatement that TurboTax never mentioned. She submitted the request right then and there, and my $29 penalty is being removed completely! The agent also explained how to adjust my withholding for 2025 to avoid the same issue. Would have saved myself a lot of headaches if I'd just tried this sooner instead of being so skeptical.

Just a helpful tip about underpayment penalties - you can often get them waived completely with something called "first-time penalty abatement" if you've had a clean tax record for the past 3 years. The IRS doesn't advertise this much, but it's a real thing. When I had an underpayment penalty last year (about $45), I just called the IRS and politely asked if I qualified for first-time penalty abatement. The agent checked my history and removed it immediately. This isn't an audit risk or anything - it's a standard courtesy they offer to otherwise compliant taxpayers. Worth trying before you pay the penalty!

Everyone's giving good advice but missing something important - check if your STATE also has an underpayment penalty! I paid my federal one only to find out my state had separately assessed one too. Double whammy. The state penalties sometimes have different rules for waiving them.

This is really helpful information from everyone! I had no idea about the first-time penalty abatement - that sounds like exactly what I need to try for my $29 penalty. @Teresa Boyd - when you called the IRS about this, did you need any specific documentation or did they just look up your history automatically? I'm definitely going to give this a shot before just paying the penalty. Also appreciate the heads up about checking state penalties too. I'm in Texas so no state income tax here, but that's definitely something others should watch out for. It's frustrating that TurboTax doesn't mention any of these options when the penalty shows up. You'd think they'd at least tell you about the first-time abatement possibility instead of just making you feel like you have to pay it.

I'm going through something similar and this thread has been incredibly helpful! I had a $47 underpayment penalty show up in TurboTax and was equally frustrated about paying for software that didn't prevent this. After reading everyone's advice, I'm definitely going to try calling the IRS about the first-time penalty abatement. My situation sounds exactly like @Nolan Carter's - just regular W-2 income, never had penalties before, and TurboTax never warned me this could happen. One thing I'm curious about - for those who successfully got the penalty removed, how long did it take for the IRS to actually process the abatement? I want to make sure I don't accidentally pay the penalty while waiting for their decision. Also, has anyone tried updating their W-4 withholding mid-year to prevent this from happening again? I'm wondering if I should increase my withholding now for 2025 or wait until I talk to the IRS agent.