Table of Contents
- What's New for 2008
- Introduction
- Topics - This chapter discusses:
- Useful Items - You may want to see:
- General Rule
- Exceptions
- Figuring Your Required Annual Payment (Part I)
- Short Method for Figuring the Penalty (Part III)
- Regular Method for Figuring the Penalty (Part IV)
- Farmers and Fishermen
- Waiver of Penalty
You should consider the items in this section when figuring any underpayment penalty for 2008.
Penalty rate. The penalty for underpayment of 2008 estimated tax is figured at an annual rate of 6% for the number of days the underpayment remained unpaid from April 16, 2008, through June 30, 2008; 5% for the number of days the underpayment remained unpaid from July 1, 2008, through September 30, 2008; 6% for the number of days the underpayment remained unpaid from October 1, 2008, through December 31, 2008; and 5% from January 1, 2009, through April 15, 2009.
Waiver of penalty for certain federally declared disasters. Generally, required estimated tax payment deadlines were extended for taxpayers affected by federally declared disasters. You will be granted a waiver of all or part of your underpayment of tax penalty for late payments due to such disaster. See the Instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, for more details.
If you did not pay enough tax, either through withholding or by making estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty.
You may understand this chapter better if you can refer to copies of your latest federal income tax returns.
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The total of your withholding and estimated tax payments was at least as much as your 2007 tax (or 110% of your 2007 tax if your adjusted gross income (AGI) was more than $150,000, $75,000 if your 2008 filing status is married filing separately), and you paid all required estimated tax payments on time.
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The tax balance due on your return is no more than 10% of your total 2008 tax, and you paid all required estimated tax payments on time.
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Your total 2008 tax (defined on page 55) minus your withholding is less than $1,000.
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You did not have a tax liability for 2007.
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You did not have any withholding taxes and your current year tax less any household employment taxes is less than $1,000.
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You are requesting a waiver of part, but not all, of the penalty.
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You are using the annualized income installment method to figure the penalty.
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You are treating the federal income tax withheld from your income as paid on the dates actually withheld.
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The general rule for the underpayment penalty,
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Special rules for certain individuals,
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Exceptions to the underpayment penalty,
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How to figure your underpayment and the amount of your penalty on Form 2210, and
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How to ask the IRS to waive the penalty.
Form (and Instructions)
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2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts
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2210-F Underpayment of Estimated Tax by Farmers and Fishermen
See chapter 5 for information about getting these forms.
In general, you may owe a penalty for 2008 if the total of your withholding and estimated tax payments did not equal at least the smaller of:
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90% of your 2008 tax, or
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100% of your 2007 tax. (Your 2007 tax return must cover a 12-month period.)
Your 2008 tax, for this purpose, is defined under Total tax for 2008 on page 55.
Example.
You did not make estimated tax payments for 2008 because you thought you had enough tax withheld from your wages. Early in January 2009, you made an estimate of your total 2008 tax. Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax.
On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Your final return shows your total tax to be $50 less than your estimate, so you are due a refund.
You do not owe a penalty for your payment due January 15, 2009. However, you may owe a penalty through January 10, 2009, the day you made the $3,000 payment, for your underpayments for the earlier payment periods.
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22.5% of your 2008 tax, or
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25% of your 2007 tax. (Your 2007 tax return must cover a 12-month period.)
The tax you would have paid had you filed a separate return | ||
The total tax you and your spouse would have paid had you filed separate returns |
Example.
Lisa and Paul filed a joint return for 2007 showing taxable income of $49,000 and a tax of $6,571. Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. For 2008, they file married filing separately. Lisa figures her share of the tax on the 2007 joint return as follows.
2007 tax on $41,000 based on a separate return | $ 6,680 |
2007 tax on $8,000 based on a separate return |
813 |
Total | $ 7,493 |
Lisa's percentage of total tax ($6,680 ÷ $ 7,493) |
89.15% |
Lisa's part of tax on joint return ($6,571 × 89.15%) |
$ 5,858 |
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You request a waiver. See Waiver of Penalty on page 60.
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You use the annualized income installment method. See the explanation of this method under Annualized Income Installment Method (Schedule AI) beginning on page 57.
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You use your actual withholding for each payment period for estimated tax purposes. See Actual withholding method under Figuring Your Underpayment (Part IV, Section A) on page 57.
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You base any of your required installments on the tax shown on your 2007 return and you filed or are filing a joint return for either 2007 or 2008, but not for both years.
Generally, you do not have to pay an underpayment penalty if either:
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Your total tax is less than $1,000, or
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You had no tax liability last year.
You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000.
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Self-employment tax (line 57).
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Tax from recapture of investment credit, low-income housing credit, qualified electric vehicle credit, Indian employment credit, new markets credit, alternative motor vehicle credit, alternative fuel vehicle refueling property credit, or credit for employer-provided childcare facilities (included on line 61).
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Tax on early distributions from (a) an IRA or other qualified retirement plan, (b) an annuity, or (c) a modified endowment contract entered into after June 20, 1988 (included on line 59).
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Tax on distributions from a Coverdell education savings account or a qualified tuition program not used for qualified education expenses (included on line 59).
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Tax on Archer MSA, Medicare Advantage MSA, or health savings account distributions not used for qualified medical expenses (included on line 61).
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Additional tax on a health savings account because you did not remain an eligible individual during the test period (included on line 61).
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Section 72(m)(5) excess benefits tax (included on line 61).
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Advance earned income credit payments (line 60).
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Tax on accumulation distribution of trusts (included on line 61).
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Interest due under sections 453(l)(3) and 453A(c) on certain installment sales of property (included on line 61).
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An increase or decrease in tax as a shareholder in a qualified electing fund (included on line 61).
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Tax on electing small business trusts included on Form 1041, Schedule G, line 7 (included on line 61).
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Tax on income not effectively connected with a U.S. trade or business from Form 1040NR, lines 52 and 55 (included on line 61).
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Household employment taxes, including any advance EIC payments made to your employees (line 60). See the Instructions for Form 2210, Line 2, for an exception to including this amount.
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Additional tax on income you received from a nonqualified deferred compensation plan that fails to meet certain requirements (included on line 61).
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Additional tax on recapture of a charitable contribution deduction relating to the contribution of a fractional interest in tangible personal property (included on line 61).
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Earned income credit (line 64a).
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Additional child tax credit (line 66).
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Credit for federal tax paid on fuels (included on line 68, box b).
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Refundable credit for prior year minimum tax (line 68, box c).
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Health coverage tax credit (included on line 68, box d).
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First-time homebuyer credit (line 69).
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Recovery rebate credit (line 70).
You do not owe a penalty if you had no tax liability last year and you were a U.S. citizen or resident for the whole year. For this rule to apply, your tax year must have included all 12 months of the year.
You had no tax liability for 2007 if your total tax was zero or you were not required to file an income tax return.
Example.
Ray, who is single and 22 years old, was unemployed for most of 2007. He earned $2,700 in wages before he was laid off, and he received $2,500 in unemployment compensation afterwards. He had no other income. Even though he had gross income of $5,200, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($8,750 for 2007). He filed a return only to have his withheld income tax refunded to him.
In 2008, Ray began regular work as an independent contractor. Ray made no estimated tax payments in 2008. Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2008 because he had no tax liability in 2007.
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Self-employment tax (line 58).
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Tax from recapture of investment credit, low-income housing credit, qualified electric vehicle credit, Indian employment credit, new markets credit, alternative motor vehicle credit, alternative fuel vehicle refueling property credit, or credit for employer-provided childcare facilities (included on line 63).
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Tax on early distributions from (a) an IRA or other qualified retirement plan, (b) an annuity, or (c) a modified endowment contract entered into after June 20, 1988 (included on line 60).
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Tax on distributions from a Coverdell education savings account or a qualified tuition program not used for qualified education expenses (included on line 60).
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Tax on Archer MSA, Medicare Advantage MSA, or health savings account distributions not used for qualified medical expenses (included on line 63).
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Additional tax on a health savings account because you did not remain an eligible individual during the test period (included on line 63).
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Section 72(m)(5) excess benefits tax (included on line 63).
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Advance earned income credit payments (line 61).
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Tax on accumulation distribution of trusts (included on line 63).
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Interest due under sections 453(l)(3) and 453A(c) on certain installment sales of property (included on line 63).
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An increase or decrease in tax as a shareholder in a qualified electing fund (included on line 63).
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Tax on electing small business trusts included on Form 1041, Schedule G, line 7 (included on line 63).
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Tax on income not effectively connected with a U.S. trade or business from Form 1040NR, lines 53 and 56 (included on line 63).
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Household employment taxes, including any advance EIC payments made to your employees (line 62). See the Instructions for Form 2210, Line 2, for an exception to including this amount.
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Additional tax on income you received from a nonqualified deferred compensation plan that fails to meet certain requirements (included on line 63).
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Additional tax on recapture of a charitable contribution deduction relating to the contribution of a fractional interest in tangible personal property (included on line 63).
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Earned income credit (line 66a).
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Additional child tax credit (line 68).
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Credit for federal tax paid on fuels (included on line 70, box b).
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Health coverage tax credit (included on line 70, box c).
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Refundable credit for prior year minimum tax (line 71).
Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. If you rounded the entries on your tax return to whole dollars, you can round on Form 2210.
Example.
The tax on Ivy Fields' 2007 return was $10,000. Her AGI was not more than $150,000. The tax on her 2008 return (Form 1040, line 44) is $11,000. She does not claim any credits or pay any other taxes.
For 2008, Ivy had $1,600 income tax withheld and paid $6,800 estimated tax. Her total payments were $8,400. 90% of her 2008 tax is $9,900. Because she paid less than her 2007 tax ($10,000) and less than 90% of her 2008 tax, and does not meet an exception, Ivy knows that she owes a penalty for underpayment of estimated tax. The IRS will figure the penalty for Ivy, but she decides to figure it herself on Form 2210 and pay it with her $2,600 tax balance when she files her tax return.
Ivy's required annual payment is $9,900 ($11,000 × 90%) because that is smaller than her 2007 tax.
Figure 4-A on page 62 shows page 1 of Ivy's filled-in Form 2210. Her required annual payment of $9,900 is shown on line 9.
You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. If you qualify to use this method, it will result in the same penalty amount as the regular method. However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty.
You can use the short method only if you meet one of the following requirements.
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You made no estimated tax payments for 2008 (it does not matter whether you had income tax withholding).
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You paid the same amount of estimated tax on each of the four payment due dates.
If you do not meet either requirement, figure your penalty using the regular method in Form 2210, Part IV.
Note.
If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. However, if the payment was only a few days early, the difference is likely to be small.
You cannot use the short method if any of the following applies.
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You made any estimated tax payments late.
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You checked box C or D in Part II of Form 2210.
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You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U.S. income tax withholding.
If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Also, you cannot use your actual withholding during each period to figure your payments for each period. These methods, which may give you a smaller penalty amount, are explained starting on this page under Figuring Your Underpayment (Part IV, Section A).
Example.
Assume the same facts for Ivy Fields as in the previous example on page 56. Ivy paid her estimated tax payments in four installments of $1,700 ($6,800 ÷ 4) each on the dates it was due.
Ivy qualifies to use the short method to figure her estimated tax penalty. Using the annualized income installment method or actual withholding will not give her a smaller penalty amount because her income and withholding were distributed evenly throughout the year. Therefore, she figures her penalty in Part III of Form 2210 (see Figure 4-A (Continued) on page 63) and leaves Part IV (not shown) blank.
Ivy figures her $1,500 total underpayment for the year (line 14) by subtracting the total of her withholding and estimated tax payments ($8,400) from her $9,900 required annual payment (line 10). The maximum penalty on her underpayment (line 15) is $54 ($1,500 × .03571).
Ivy plans to file her return and pay her $2,600 tax balance on March 16, 2009, 30 days before April 15. Therefore, she does not owe part of the maximum penalty amount. The part she does not owe (line 16) is figured as follows.
Ivy subtracts the $6 from the $54 maximum penalty and enters the result, $48, on Form 2210, line 17, and on Form 1040, line 76. She adds $48 to her $2,600 tax balance and enters the result, $2,648 on line 75 of her Form 1040. Ivy files her return on March 16 and attaches a check for $2,648. Because Ivy did not check any of the boxes in Part II, she does not attach Form 2210 to her tax return.
You may use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date.
You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you.
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You paid one or more estimated tax payments on a date after the due date.
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You paid at least one, but less than four, installments of estimated tax.
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You paid estimated tax payments in un-
equal amounts. -
You use the annualized income installment method to figure your underpayment for each payment period.
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You use your actual withholding during each payment period to figure your payments.
If you use the regular method, figure your underpayment for each payment period in Section A, then figure your penalty for each payment period in Section B.
Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions. Complete lines 20 through 26 of the first column before going to line 20 of the next column.
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Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and
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One-fourth of your withholding.
If you received your income evenly throughout the year, use the regular installment method to figure your estimated tax underpayment for the year.
Example.
Ben Brown's 2008 total tax (Form 1040, line 61) is $7,031, the total of his $4,685 income tax and $2,346 self-employment tax. His 2007 AGI was less than $150,000. He does not owe any other taxes or claim any credits other than for withholding. His 2007 tax was $6,116. See Figure 4-B on page 64 to see Ben's completed Form 2210, Part I.
Ben's employer withheld $3,228 income tax during 2008. Ben paid no estimated tax for either the first or second period, but he paid $1,000 each on August 29, 2008, and January 12, 2009, for the third and fourth periods. Because the total of his withholding and estimated tax payments, $5,228 ($3,228 + $1,000 + $1,000), was less than both 90% of his 2008 tax (90% x $7,031 = $6,328), and 100% of his 2007 tax ($6,116), Ben knows he owes a penalty for underpayment of estimated tax. He decides to figure the penalty on Form 2210 and pay it with his $1,803 tax balance ($7,031 − $5,228) when he files his tax return on April 15, 2009.
Ben's required annual payment (Part I, line 9) is $6,116. Because his income and withholding were distributed evenly throughout the year, Ben enters one-fourth of his required annual payment, $1,529, in each column of line 18 (see Figure 4-B (Continued) on page 65). On line 19, he enters one-fourth of his withholding, $807, in the first two columns and $1,807 ($807 plus $1,000 estimated tax payment) in the last two columns.
Ben has an underpayment (line 25) for each payment period even though his withholding and estimated tax payments for the third and fourth periods were more than his required installments (line 18). This is because the estimated tax payments made in the third and fourth periods are first applied to underpayments for the earlier periods.
If you did not receive your income evenly throughout the year (for example, your income from a repair shop you operated was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Under this method, your required installment (line 18) for one or more payment periods may be less than one-fourth of your required annual payment.
To figure your underpayment using this method, complete Schedule AI of Form 2210 (see Figure 4-C on page 66 for an example). The schedule annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period.
If you use the annualized income installment method, you must check box C in Part II of Form 2210. You also must attach Form 2210 and Schedule AI to your return.
If you use Schedule AI for any payment due date, you must use it for all payment due dates.Note.
Each period includes amounts from the previous period(s).
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Period (a) includes items for January 1 through March 31.
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Period (b) includes items for January 1 through May 31.
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Period (c) includes items for January 1 through August 31.
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Period (d) includes items for the entire year.
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8 for the first period,
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4.8 for the second period,
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3 for the third period, and
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2 for the fourth period.
Column (a)—1/1/08 to 3/31/08: | |||
$1,250 per month × 3 months | $3,750 | ||
Column (b)—1/1/08 to 5/31/08: $1,250 per month × 5 months |
$6,250 | ||
Plus: | Self-employment income through 5/31/08 | 3,600 | |
Less: | Self-employment tax deduction ($1,221 ÷ 4.8) | (254) | |
$9,596 | |||
Column (c)—1/1/08 to 8/31/08: $1,250 per month × 8 months |
$10,000 | ||
Plus: | Self-employment income through 8/31/08 | 8,600 | |
Less: | Self-employment tax deduction ($1,822 ÷ 3) | (607) | |
$17,993 | |||
Column (d)—1/1/08 to 12/31/08: | |||
$1,250 per month × 12 months | $15,000 | ||
Plus: | Self-employment income through 12/31/08 | 16,600 | |
Less: | Self-employment tax deduction ($2,346 ÷ 2) | (1,173) | |
$30,427 |
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1st period: $2,250 ($750 × 3 months).
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2nd period: $3,750 ($750 × 5 months).
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3rd period: $6,000 ($750 × 8 months).
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4th period: $9,000 ($750 × 12 months).
Figure the amount of your penalty in Section B following the instructions. The penalty is imposed on each underpayment shown in Section A, line 25, for the number of days that it remained unpaid. (You may find it helpful to show the date of payment beside each amount on line 25.)
For 2008, there are four rate periods to figure the penalty. Use Rate Period 1 (lines 27 and 28) to apply the 6% rate in effect from April 16, 2008, through June 30, 2008. Use Rate Period 2 (lines 29 and 30) to apply the 5% rate in effect from July 1, 2008, through September 30, 2008. Use Rate Period 3 (lines 31 and 32) to apply the 6% rate in effect from October 1, 2008, through December 31, 2008. Use Rate Period 4 (lines 33 and 34) to apply the 5% rate in effect from January 1, 2009, through April 15, 2009.
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Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date.
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In the same manner, find the number for the date the payment was made.
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Subtract the due date “number” from the payment date “number.”
Table 4-1.Calendar To Determine the Number of Days a Payment Is Late
Instructions.Use this table with Form 2210 if you are completing Part IV, Section B. First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Then, in the same manner, find the number for the date the payment was made. Finally, subtract the due date number from the payment date number. The result is the number of days the payment is late.
Example.The payment due date is June 15 (61). The payment was made on November 4 (203). The payment is 142 days late (203 − 61).
|
Tax Year 2008 | |||||||||||||
Day of | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | 2009 |
Month | April | May | June | July | Aug. | Sept. | Oct. | Nov. | Dec. | Jan. | Feb. | Mar. | Apr. |
1 | 16 | 47 | 77 | 108 | 139 | 169 | 200 | 230 | 261 | 292 | 320 | 351 | |
2 | 17 | 48 | 78 | 109 | 140 | 170 | 201 | 231 | 262 | 293 | 321 | 352 | |
3 | 18 | 49 | 79 | 110 | 141 | 171 | 202 | 232 | 263 | 294 | 322 | 353 | |
4 | 19 | 50 | 80 | 111 | 142 | 172 | 203 | 233 | 264 | 295 | 323 | 354 | |
5 | 20 | 51 | 81 | 112 | 143 | 173 | 204 | 234 | 265 | 296 | 324 | 355 | |
6 | 21 | 52 | 82 | 113 | 144 | 174 | 205 | 235 | 266 | 297 | 325 | 356 | |
7 | 22 | 53 | 83 | 114 | 145 | 175 | 206 | 236 | 267 | 298 | 326 | 357 | |
8 | 23 | 54 | 84 | 115 | 146 | 176 | 207 | 237 | 268 | 299 | 327 | 358 | |
9 | 24 | 55 | 85 | 116 | 147 | 177 | 208 | 238 | 269 | 300 | 328 | 359 | |
10 | 25 | 56 | 86 | 117 | 148 | 178 | 209 | 239 | 270 | 301 | 329 | 360 | |
11 | 26 | 57 | 87 | 118 | 149 | 179 | 210 | 240 | 271 | 302 | 330 | 361 | |
12 | 27 | 58 | 88 | 119 | 150 | 180 | 211 | 241 | 272 | 303 | 331 | 362 | |
13 | 28 | 59 | 89 | 120 | 151 | 181 | 212 | 242 | 273 | 304 | 332 | 363 | |
14 | 29 | 60 | 90 | 121 | 152 | 182 | 213 | 243 | 274 | 305 | 333 | 364 | |
15 | 0 | 30 | 61 | 91 | 122 | 153 | 183 | 214 | 244 | 275 | 306 | 334 | 365 |
16 | 1 | 31 | 62 | 92 | 123 | 154 | 184 | 215 | 245 | 276 | 307 | 335 | |
17 | 2 | 32 | 63 | 93 | 124 | 155 | 185 | 216 | 246 | 277 | 308 | 336 | |
18 | 3 | 33 | 64 | 94 | 125 | 156 | 186 | 217 | 247 | 278 | 309 | 337 | |
19 | 4 | 34 | 65 | 95 | 126 | 157 | 187 | 218 | 248 | 279 | 310 | 338 | |
20 | 5 | 35 | 66 | 96 | 127 | 158 | 188 | 219 | 249 | 280 | 311 | 339 | |
21 | 6 | 36 | 67 | 97 | 128 | 159 | 189 | 220 | 250 | 281 | 312 | 340 | |
22 | 7 | 37 | 68 | 98 | 129 | 160 | 190 | 221 | 251 | 282 | 313 | 341 | |
23 | 8 | 38 | 69 | 99 | 130 | 161 | 191 | 222 | 252 | 283 | 314 | 342 | |
24 | 9 | 39 | 70 | 100 | 131 | 162 | 192 | 223 | 253 | 284 | 315 | 343 | |
25 | 10 | 40 | 71 | 101 | 132 | 163 | 193 | 224 | 254 | 285 | 316 | 344 | |
26 | 11 | 41 | 72 | 102 | 133 | 164 | 194 | 225 | 255 | 286 | 317 | 345 | |
27 | 12 | 42 | 73 | 103 | 134 | 165 | 195 | 226 | 256 | 287 | 318 | 346 | |
28 | 13 | 43 | 74 | 104 | 135 | 166 | 196 | 227 | 257 | 288 | 319 | 347 | |
29 | 14 | 44 | 75 | 105 | 136 | 167 | 197 | 228 | 258 | 289 | 348 | ||
30 | 15 | 45 | 76 | 106 | 137 | 168 | 198 | 229 | 259 | 290 | 349 | ||
31 | 46 | 107 | 138 | 199 | 260 | 291 | 350 |
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Determining the date(s) an underpayment was paid,
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Determining the number of days between the due date and the payment date(s), and
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Multiplying the amount of underpayment by the number of days unpaid and the appropriate penalty rate.
Column (a) |
Column (b) |
Column (c) |
Column (d) |
|
line 27 | 76 | 15 | — | — |
line 29 | 92 | 92 | 15 | — |
line 31 | 92 | 92 | 92 | — |
line 33 | 105 | 105 | 105 | 90 |
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Of the $807 he paid for the second period, $722 is applied to the underpayment remaining from the first period.
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That leaves $85 ($807 – $722) to apply to his second period required installment of $1,529.
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The result, $1,444 ($1,529 − $85), is Ben's underpayment for the second period.
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Of the $1,807 he paid for the third period, $1,444 is applied to the underpayment remaining from the second period.
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That leaves $363 ($1,807 − $1,444) to apply to his third period required installment of $1,529.
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The result, $1,166 ($1,529 − $363), is Ben's underpayment for the third period.
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Of the $1,807 he paid for the fourth period, $1,166 is applied to the underpayment remaining from the third period.
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That leaves $641 ($1,807 − $1,166) to apply to his fourth period required installment of $1,529.
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The result, $888 ($1,529 − $641) is Ben's underpayment for the fourth period.
If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you.
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The penalty for underpaying your 2008 estimated tax will not apply if you file your return and pay all the tax due by March 2, 2009. If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year.
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Any penalty you owe for underpaying your 2008 estimated tax will be figured from one payment due date, January 15, 2009.
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The underpayment penalty for 2008 is figured on the difference between the amount of 2008 withholding plus estimated tax paid by the due date and the smaller of:
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66% (rather than 90%) of your 2008 tax, or
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100% of the tax shown on your 2007 return.
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Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed on page 55 under Exceptions.
See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules.
The IRS can waive the penalty for underpayment if either of the following applies.
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You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty.
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You retired (after reaching age 62) or became disabled in 2007 or 2008 and both the following requirements are met.
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You had a reasonable cause for not making the payment.
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Your underpayment was not due to willful neglect.
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Check box A or B in Part II.
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If you checked box A, complete only page 1 of Form 2210.
-
If you checked box B:
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Complete line 1 through line 16 (or lines 1 through 9 and 18 through 34 if you use the regular method) without regard to the waiver.
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Enter the amount you want waived in parentheses on the dotted line next to line 17 (line 35 for the regular method).
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Subtract this amount from the total penalty you figured without regard to the waiver. Enter the result on line 17 (line 35 for the regular method).
-
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Attach Form 2210 and a statement to your return explaining the reasons you were unable to meet the estimated tax requirements and the time period for which you are requesting a waiver.
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If you are requesting a penalty waiver due to retirement or disability, attach documentation that shows your retirement date (and your age on that date) or the date you became disabled.
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If you are requesting a penalty waiver due to a casualty, disaster, or other unusual circumstance, attach documentation such as police and insurance company reports. See later on this page for special procedures that apply for federally declared disasters.
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Check box 1a in Part I.
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Complete line 2 through line 20 without regard to the waiver.
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Enter the amount you want waived in parentheses on the dotted line next to line 21.
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Subtract this amount from the total penalty you figured without regard to the waiver. Enter the result on line 21.
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Attach Form 2210-F and a statement to your return explaining the reasons you were unable to meet the estimated tax requirements.
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If you are requesting a penalty waiver due to retirement or disability, attach documentation that shows your retirement date (and your age on that date) or the date you became disabled.
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If you are requesting a penalty waiver due to a casualty, disaster, or other unusual circumstance, attach documentation such as police and insurance company reports.
Worksheet 4-1.2008 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet
Note. | To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the annualization amount for the same period. |
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1. | Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 | 1. | ||||||
2. | Enter your annualized qualified dividends for the period | 2. | ||||||
3. | Are you filing Schedule D? | |||||||
□ Yes. Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. If either line 15 or line 16 is a loss, enter -0-. | 3. | |||||||
□ No. Enter your annualized capital gain or (loss) from Form 1040, line 13 | ||||||||
4. | Add lines 2 and 3 | 4. | ||||||
5. | If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Otherwise, enter -0- | 5. | ||||||
6. | Subtract line 5 from line 4. If zero or less, enter -0- | 6. | ||||||
7. | Subtract line 6 from line 1. If zero or less, enter -0- | 7. | ||||||
8. | Enter the smaller of:
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8. | ||||||
9. | Is the amount on line 7 equal to or more than the amount on line 8? □ Yes. Skip lines 9 and 10; go to line 11 and check the “No” box. □ No. Enter the amount from line 7 |
9. | ||||||
10. | Subtract line 9 from line 8. | 10. | ||||||
11. | Are the amounts on lines 6 and 10 the same? □ Yes. Skip lines 11 through 14; go to line 15. □ No. Enter the smaller of line 1 or line 6 |
11. | ||||||
12. | Enter the amount from line 10 (if line 10 is blank, enter -0-) | 12. | ||||||
13. | Subtract line 12 from line 11 | 13. | ||||||
14. | Multiply line 13 by 15% (.15) | 14. | ||||||
15. | Figure the tax on the amount on line 7. Use the Tax Table or Tax Computation Worksheet in the 2008 Form 1040 instructions, whichever applies | 15. | ||||||
16. | Add lines 14 and 15 | 16. | ||||||
17. | Figure the tax on the amount on line 1. Use the Tax Table or Tax Computation Worksheet in the 2008 Form 1040 instructions, whichever applies | 17. | ||||||
18. | Tax on all taxable income. Enter the smaller of line 16 or line 17. Enter this amount on line 12 of Schedule AI | 18. |
Worksheet 4-2.2008 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet
Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. | |||
1. | Enter the amount from line 11 of Schedule AI for the period | 1. | |
2. | Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1 of Schedule AI | 2. | |
3. | Add lines 1 and 2 | 3. | |
4. | Tax on the amount on line 3. Use the Tax Table, Tax Computation Worksheet, Form 8615,** Qualified Dividends and Capital Gain Worksheet,*** or Schedule D Tax Worksheet,*** whichever applies. See the 2008 Instructions for Form 1040, line 44, to find out which tax computation method to use. (Note. You do not have to use the same method for each period on Schedule AI.) | 4. | |
5. | Tax on the amount on line 2. Use the Tax Table or Tax Computation Worksheet, whichever applies, from the 2008 Form 1040 instructions | 5. | |
6. | Subtract line 5 from line 4. Enter the result here and on line 12 of Schedule AI. If zero or less, enter -0- |
6. | |
* To figure the annualized amount for line 2, multiply the exclusion for the period by the annualization amount on line 2 of Schedule AI for the same period. | |||
** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Complete the rest of Form 8615 according to its instructions. Then complete lines 5 and 6 above. | |||
*** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Next, determine if you have a capital gain excess. | |||
Figuring capital gain excess. To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). If the result is more than zero, that amount is your capital gain excess. | |||
No capital gain excess. If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Then complete lines 5 and 6 above. | |||
Capital gain excess. If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Then complete lines 5 and 6 above. | |||
Make these modifications only for purposes of filling out Worksheet 4-2 above. | |||
a. Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 7 of your Schedule D Tax Worksheet by your capital gain excess. | |||
b. Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. | |||
c. Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. | |||
d. Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet on page D-9 of the 2008 Instructions for Schedule D (Form 1040). |
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