Table of Contents
Complete lines 1 through 5 to figure the corporation's required annual payment.
Note.
For information on how to figure the total tax for estimated tax purposes, see the following forms or their instructions.
• 990-PF | • 1120-FSC | • 1120-REIT |
• 990-T | • 1120-L | • 1120-RIC |
• 1120-C | • 1120-ND | • 1120S |
• 1120-F | • 1120-PC | • 1120-SF |
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The corporation did not file a tax return for 2006 that showed a liability for at least some amount of tax.
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The corporation had a 2006 tax year of less than 12 months.
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The total of the investment credit recapture tax and the built-in gains tax shown on the return for the 2007 tax year and
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Any excess net passive income tax shown on the S corporation's return for the 2006 tax year.
If the 2006 tax year was less than 12 months, skip line 4 and enter on line 5 the amount from line 3.
Example.
A ski shop, which receives most of its income during the winter months, may benefit from using one or both of these methods to figure its required installments. The annualized income installment or adjusted seasonal installment may be less than the required installment under the regular method for one or more due dates. Using one or both of these methods may reduce or eliminate the penalty for those due dates.
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The adjusted seasonal installment (if applicable),
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The annualized income installment (if applicable), or
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The regular installment under section 6655(d)(1) (increased by any recapture of a reduction in a required installment under section 6655(e)(1)(B)).
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If the corporation is using only the adjusted seasonal installment method, check the box in Part II on line 6 and complete Parts I and III of Schedule A.
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If the corporation is using only the annualized income installment method, check the box in Part II on line 7 and complete Parts II and III of Schedule A.
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If the corporation is using both methods, check the boxes in Part II on lines 6 and 7 and complete all three parts of Schedule A.
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If the box on line 8 (but not line 6 or line 7) is checked and line 3 is smaller than line 4, enter 25% of line 3 in columns (a) through (d) of line 10.
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If the box on line 8 (but not line 6 or line 7) is checked and line 4 is smaller than line 3, enter 25% of line 4 in column (a) of line 10. In column (b), figure the amount to enter as follows:
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Subtract line 4 from line 3,
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Add the result to the amount on line 3, and
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Multiply the total in item b above by 25%, and enter the result in column (b).
In columns (c) and (d), enter 25% of line 3.
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If the box on line 8 and the box on line 6 and/or line 7 are checked, follow the instructions in items 1 and 2 above by substituting Schedule A, line 35 for line 10 and complete the rest of Schedule A, Part III.
Complete lines 19 through 34 to determine the amount of the penalty. The penalty is figured for the period of underpayment using the underpayment rate determined under section 6621(a)(2). The period of underpayment runs from the installment due date to the earlier of the date the underpayment is actually paid or the 15th day of the third month after the close of the 2007 tax year. For information on obtaining the interest rate on underpayments paid after March 31, 2008, see the footnote on page 2 of Form 2220.
Example.
A corporation underpaid the April 15 installment by $1,000. The June 15 installment requires a payment of $2,500. On June 10, the corporation deposits $2,500 to cover the June 15 installment. However, $1,000 of this payment is applied against the April 15 installment. The penalty for the April 15 installment is figured from April 15 to June 10 (56 days). The remaining $1,500 is applied to the June 15 installment.
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Any item identified in Regulations section
1.1502-76(b)(2)(ii)(C)(1), (2),(3),(4), (7) and (8); -
A net operating loss carryover;
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A section 481(a) adjustment; and
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Net gain or loss from the disposition of 25% or more of the fair market value of the corporation´s business assets during the tax year.
The corporation can use the adjusted seasonal installment method only if the corporation's base period percentage for any 6 consecutive months of the tax year is 70% or more. The base period percentage for any period of 6 consecutive months is the average of the 3 percentages figured by dividing the taxable income for the corresponding 6-consecutive-month period in each of the 3 preceding tax years by the total taxable income for each of the 3 preceding tax years, respectively. Figure the base period percentage using the 6-month period in which the corporation normally receives the largest part of its taxable income.
Example.
An amusement park with a 2007 calendar tax year receives the largest part of its taxable income during the 6-month period from May through October. To compute its base period percentage for this 6-month period in 2007, the amusement park figures its taxable income for each May-October period in 2004, 2005, and 2006. It then divides the taxable income for each May-October period by the total taxable income for that particular tax year. The resulting percentages are: 69% (.69) for May-October 2004, 74% (.74) for May-October 2005, and 67% (.67) for May-October 2006. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May-October 2007 is 70%. Therefore, the amusement park qualifies for the adjusted seasonal installment method.
Use Option 1 or Option 2 only if the corporation elected to do so by filing Form 8842, Election To Use Different Annualization Periods for Corporate Estimated Tax, by the due date of the first required installment payment. Once made, the election is irrevocable for the particular tax year.
Option 2 is not available to tax-exempt organizations and private foundations. See the options shown in the table below for these entities.
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