• Calculating estimated penalties is out-of-scope. Tax-Aide policy is that any penalties must be calculated by and billed by federal and state tax authorities.
  • If the taxpayer owes more than $1,000 on their federal return, the taxpayer may – depending on a variety of factors - be billed by the IRS for the underpayment. 
    • Inform the taxpayer of a potential penalty or penalties, that the penalty or penalties won’t be on the return, and that the tax authorities may send them a bill for the penalty amount(s).
    • If large amounts are due, you should talk to the taxpayer about adjusting withholding on wages, pensions, Social Security, and other recurring payments, and/or making or increasing quarterly estimated payments. See page 114 for further discussion on this.

Federal Penalty

  • When you start the E-file section, if the taxpayer owes more than $1,000, you’ll see a warning that includes “You may be subject to an estimated tax penalty.” The warning also includes information on how to get to the TaxSlayer page to enter information for Form 2210, to calculate the penalty. Don’t enter information for Form 2210; it is out-of-scope.
  • The federal penalty – if Form 2210 is filled out by mistake – shows on Form 1040 Line 38. 
    • To remove the amount on Line 38, enter “2210” in the search box and go to the Underpayment of Estimated Tax page. Put $1 in the “Prior year's tax” field, set the payment date to 6-30-2025, and click “Continue.” 

CA Penalty

  • The CA threshold for potential penalties is owing more than $500. 
  • Don’t enter any information in the Underpayment of Estimated Tax, Form 5805 page, in the State Section.
  • If CA Form 5805 is filled out by mistake, the penalty shows on Form 540 page 5 line 113.
    • To fix, go to the page (State Section > Miscellaneous Forms) and answer “No” to the first question.

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