Q: Why does TurboTax tell me I own penalty and interest even if I am paying before Tax Day?
There could be several reasons why TurboTax is indicating that you owe penalty and interest even if you are paying before the tax deadline. Some possible explanations include:
- Estimated tax payments: If you are self-employed or have significant income from sources other than wages (e.g., freelance work, investments), you may be required to make quarterly estimated tax payments throughout the year. If you didn’t make these payments or made them late, you could be subject to penalties and interest.
- Underpayment penalty: The IRS may charge an underpayment penalty if you did not withhold enough taxes from your income throughout the year, even if you pay the full amount due by the tax deadline.
- Prior year balance: If you have an outstanding balance from a previous tax year, TurboTax may include penalties and interest associated with that balance.
- Incorrect data entry: Ensure that you have entered all your financial information accurately in TurboTax. A mistake in data entry could lead to incorrect calculations, including penalties and interest that you may not actually owe.
If you believe there is an error in your TurboTax calculations, review your financial information and double-check your entries. If you are still unsure about the penalties and interest, consider consulting a tax professional or contacting TurboTax support for further assistance.