Tax question - underpayment penalty

[BA93]

My 2004 income was lopsided.

Fully employed from Jan - March.
Unemployment March - July (no taxes out of my unemploy check)
Contract position Aug - current.

I made quarterly tax payments in Sept 04 and Jan 05 based on what my accountant said. My tax prep software (TaxAct.com) is now saying I owe $200 in penalties because I didn't estimate my tax payments in April and June 2004. I had no idea at that time that I would be making 70% of my 2004 income from Aug-Dec.

Does this sound right? I'm getting a refund because I overpaid, so why should I have a penalty?

I don't really care about the $200, I just don't want my return to look strange and then trip some audit check.

 

[shrevehorn]

Most likely something wrong with your software. Sounds fishy.
A possiblility is that you were way underpaid for the first part of the year and really over-withheld for the last part, but I doubt it.

 

[shrevehorn]

Ok, I read your post a little closer. For the last part of the year, you were self employed I presume (i..e. no W-2 withholding), but I assume you were for the 1st part of the year.

A possiblility is that you have entered the data wrong into the software. And don't forget, if you are underpaid for a particular quarter, exceptions apply.

 

[eflow24]

Somethings wrong. I have missed 3 quarterly payments before (paid in full in January), and had only $200 in penalties. Check your numbers again.

 

[accuratehorn]

Take your figures down to the local IRS office on IH-35 and Braker Lane (if you are in Austin). They will give you an opinion on the correctness of what have come up with. They have been very helpful to me there.

 

[BA93]

I didn't enter the numbers correctly. When I entered the amounts I earned for each quarter, the penalty cam out to be very low. I have no problem paying a small penalty because I received unemployment benefits for approx 5 months without having any withholding taken out. I asssumed the IRS would hit me with something.

thanks for the replies. Being self-employed did wonders for my deductions. hopefully I won't get audited and have to back them up.