Here is a small explanation of my situation which I hope will help to understand my question:
I am a full time employee who lives in California. Each year I get a W2 from my employee and 1099 from my brokerage account. All the years before 2020 I got Federal and California refund at the end of the tax year.
In the middle of 2020 tax year I changed a job and this was the first year I owed money to government: ~$7k Federal, but got a ~$5k California refund. I filed taxes in time (paying that $7k) so I thought that it is not a big deal and forgot about it thinking that the issue have been due to the job change.
This year it seems like I owe ~$14k to Federal and get ~$3k California refund. On top of this TaxAct tells me that I have ~$200 of underpayment penalty.
I have no problems paying this, but:
- I feel like I have done some mistake as this is the second year I owe federal taxes. I think I should ask my company to withhold more, but not sure if this is the right approach.
- Based on my understanding I got an underpayment penalty this year because in previous year I owed federal tax. So seems like in the next year I will get another underpayment penalty. What are the implications of this and how can I avoid it in the future?
I was trying to schedule a visit to IRS to ask more about my situation, but not surprisingly everything is booked now, so I will do this after tax deadline. I would appreciate if anyone can answer my questions.