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NJ 2210 underpayment penalty calculation


tax1111
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I got lost in the Option 1 (calculating the interest) in NJ 2210 form.
TP paid estimated tax $18000 for 1st quarter and $4000 for second quarter.
Based on Option 1 form: the tax amount due for each quarter is 6000. My understanding is that TP should not be penalized for paying estimated tax early. But the Option 1 form shows that the overpayment for first quarter 12000 (18000-6000) is not carried over to the next quarter. So, TP is charged for interest for the third quarter on the underpayment of 8000 (2000 from second quarter 4000-6000, and 6000 from third quarter 0-6000), he is also charged for the 4th quarter on underpayment of 14000 (the 2000 from second quarter, 6000 from third and fourth quarter). The calculation is unreasonable to me.
If TP paid the estimated tax evenly with 5500 for each quarter (18000+4000)/4, he is charged much lower interest than the current case.
Can anyone comment on NJ 2210? Is this an error on NJ side?
Thanks.

 

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On 4/25/2022 at 8:00 AM, tax1111 said:

Line 13 of column A 1st quarter is carried over to col b, line 7 and so forth. But in Option 1, the calculation of interest, those overpayments are not carried over. I think this is a bug of Drake 2021

 

I see what you mean about the Option 1 worksheet, because I input enough in a practice return to force the NJ2210, and I also tried it in 2019 with the same issue you are having.

I don't see any way to override this calculation or line 51 of the NJ-1040 in Drake, and it doesn't seem that this is a NJ error but IS a Drake error.  You have only the options to print or suppress the NJ2210. I'm sorry.

I think you should call in to Drake's support if you haven't done so already.  From the instructions below that worksheet, Col E is clearly intended that it can be a negative (based on instructions for Col G that says "if Col E is negative") and Col B is also allowed to be negative (based on Col C instructions that says "if Col B is negative....").

 

ETA - I also posted this in response to your same question over in the Drake forum so that others may see what answer you've already been given and won't be starting over with saying the same thing or may refute my idea. I'd also like to see the resolution to this issue because I have some clients that work in NJ and may run into this in future.

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Thank you Judy for confirming my understanding. I have called Drake about this and the response from Drake programmer is that the column E can not be negative, which obvious is wrong. I also have send the Drake NJ programmer team an email about this and waiting for their response. I will update here once I hear anything. 

 

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50 minutes ago, tax1111 said:

Thank you Judy for confirming my understanding. I have called Drake about this and the response from Drake programmer is that the column E can not be negative, which obvious is wrong. I also have send the Drake NJ programmer team an email about this and waiting for their response. I will update here once I hear anything. 

 

Looking at the schedule that Drake produced from my hypothetical input using a practice return, it is clear to me that there are errors in Drake's output.  My schedule had a positive amount (incorrectly, but ignoring that fact) in col e for the 2nd qtr but didn't multiply that out in any way and reported a zero in col G for that quarter.  You are correct, it makes no sense!

 

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@tax1111,  Below is what I created using the practice return. Drake's calcs are in black and my corrections are in red.  You may have to supply something like this to Drake's programmers if you have any hope of having them correct this.  I did post this same thing over in Drake's official forum for state issues, and I tagged Merry so that she may possibly intervene on your behalf and direct this to the NJ programmers.

Also, if any users of other software (ATX, Proseries) could confirm if your program is generating this schedule that allows the negatives in columns B & E in support of this, that would be great.

Capture.JPG.a59206bd7d7cd0b01be3580b1d851d3b.JPG

Edited by jklcpa
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Thank you, Judy! That is very helpful tip!

I used to use ATX and Taxact. So, I tested in ATX 2019 and Taxact 2018. Both allows negative amounts in column B and E although the relevant table in ATX 2019 is called Option 2 rather than Option 1. I can not find NJ 2210 2019 version so I am not sure what is the right name of the table. But basically the ATX Option 2 table does the same thing as Option 1 table in 2021 NJ 2210. 

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