Penalized by IRS

ZOM225
ZOM225 Member Posts: 1 Newcomer
edited January 4 in Filing my taxes

I was also penalized by the IRS for not filing estimated taxes. Used FreeTaxUSA for number of years and I was not alerted to the fact that I should file estimated taxes even though my tax liability each year exceeded $1,000. I think this is negligent of them. It cost me $115.

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  • kiarab
    kiarab FreeTaxUSA Agent Posts: 223 image
    edited January 5

    Hello Zom225,

    I'm sorry to hear that you were penalized for underpayment. I know that can be frustrating.

    I'm going to provide some more information to help you understand how the Underpayment Penalty works so you can avoid it in the future.

    According to the IRS:

    You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

    -Your filed tax return shows you owe less than $1,000 or
    -You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%.

    https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

    So even if you had owed more than $1,000 in taxes one year, it is not a guarantee that you would be subject to the Underpayment Penalty that year, or even the next. You might have paid 100% of the tax owed owed from a previous year. We do not have a way of knowing your specific situation.

    By the time you file a tax return, it is too late to avoid the Underpayment Penalty for that tax year. We do have an option that appears under the MISC tab if you owe enough that will calculate the Underpayment Penalty for you and include it with your tax return. However, that is not required as the IRS should calculate it for you without additional penalty.

    We do appreciate you using FreeTaxUSA and we will take your feedback under consideration. We are always trying to improve and provide a good experience using our software.

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