Underwitholding Penalty

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    Just finished helping my daughter complete her family’s 2018 return using H&R Block tax prep software. As we were going though the last few question, the software announced “You may be subject to an under-witholding penalty of $45”. Huh? You couldn’t continue unless you chose to calculate the penalty yourself using the 2210 or send as is and let the IRS figure it out and bill her later on. My quandary is why an underwithholding penalty. Here’s her stats (rounded)

    AGI: $180,000, all of it from three W2s
    Tax after credits: $20,000
    W2 withholdings: $21,000

    All withholdings were automatic from each paycheck. There were no lump sum or other non-W2 income.

    I was helping by phone and not physically there so suggested she just send as is rather than trying to talk her through the 2210 when I don’t have access to her source documents.

    How could the software come up with that conclusion? There were no carry-forwards on anything. The recently released IRS Notice 2019-25 reduces the withholding requirement to 80% withholding of calculated tax. But if they had about $1,000 more in withholding for 2018, how could there possibly be an under withholding penalty?



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