My understanding is that if you pay at least 90% of your current tax year obligations, pre-deductions, or 100%† of your obligations in the previous tax year, you avoid the penalty.
I was just sent a notice (7 months late!) that I was assessed this fee on my 2022 taxes. However, my withholdings exceeded my estimated taxes (before credits and deductions), so I am struggling to figure out why the IRS thinks I owe a penalty. If I have the numbers correct, the calculation should be form 1040 line 16 (
Taxes and Credits) vs either line 25a, 25d, or 33 (
Form W-2, ``, or
Total Payments) (in my case, I only have W-2 tax payments, so they are all the same).
By those numbers, I overpaid, not underpaid.
If my understanding is not correct, what are the correct values to use for the calculation?
Clarifications from the comments:
- I received a refund in April 2023
- I didn't file an extension
- According to the IRS website, the fee was assessed on April 15 2023 for 2022 tax year. Also irritating that they are charging me 7 months of interest penalties for not paying the fee that they chose not to inform me I had to pay at the time they imposed it either.
- According to my tax prep software (TurboTax) I did not owe any penalty.
† yes, I know there are special cases where that value is different, but I don't trigger those since I overpaid this year anyway.