For 2003, the requirement to avoid the penalty based on your prior year's tax for certain higher income taxpayers is figured
using 110% of the tax
shown on your 2002 tax return. See Who Must Pay the Underpayment Penalty on this page.
Generally, use Form 2210 to see if you owe a penalty for underpaying your estimated tax and, if you do, to figure the amount
of the penalty. If you
are not required to file Form 2210, you may use it to figure your penalty if you wish to do so. Enter the penalty on your
return, but do not file Form
2210.
In most cases you do not need to file Form 2210. The IRS will figure any penalty you owe and send you a bill. See The IRS Will
Figure the Penalty for You below. Read the chart at the top of page 1 of Form 2210 to see if you need to file Form 2210.
The IRS Will Figure the Penalty for You
Because Form 2210 is complicated, we strongly encourage you to let us figure the penalty. If you owe it, we will send you
a bill. And as long as
you file your return by April 15, 2004, we will not charge you interest on the penalty if you pay by the date specified on
the bill.
If you want us to figure the penalty for you, complete your return as usual. Leave the penalty line on your return blank;
do not file Form
2210.
See Part II of the form. If box B, C, or D is checked, you must figure the penalty yourself and attach a completed
Form 2210 to your return.
We realize that there are different ways to figure the correct penalty. You do not have to use the method prescribed by Form
2210 as long as you
enter the correct penalty amount on the penalty line of your return.
However, if you are required to file Form 2210 because one or more of the boxes in Part II applies to you, you must complete
certain lines. If you
use the short method, you must complete lines 1–17. If you use the regular method, you must complete lines 1–9 and lines 18–33.
If
you use the annualized installment method (you checked box C), you must complete lines 1–9, Schedule AI, and lines 18–33 of
Part IV.
Who Must Pay the Underpayment Penalty
In general, you may owe the penalty for 2003 if you did not pay at least the smaller of:
- 90% of the tax shown on your 2003 tax return or
- The tax shown on your 2002 tax return (110% of that amount if you are not a farmer or fisherman and your adjusted gross income
(AGI) shown
on that return is more than $150,000, or, if married filing separately for 2003, more than $75,000).
Note:
In these instructions, “return” refers to your original return. However, an amended return is considered the original return if it is filed by
the due date (including extensions) of the original return. Also, a joint return that replaces previously filed separate returns
is considered the
original return.
The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date
even if you paid enough
tax later to make up the underpayment. This is true even if you are due a refund when you file your tax return. However, you
may be able to reduce or
eliminate the penalty by using the annualized income installment method. See the Schedule AI instructions beginning on page
4 for details.
Exceptions to the Penalty
You will not have to pay the penalty if either 1 or 2 applies.
- You had no tax liability for 2002, you were a U.S. citizen or resident for the entire year, and your 2002 tax return was (or
would have been
had you been required to file) for a full 12 months.
- The total tax shown on your 2003 return minus the amount of tax you paid through withholding is less than $1,000. To determine
whether the
total tax is less than $1,000, complete lines 1–7.
Special Rules for Farmers and Fishermen
If you meet both tests 1 and 2 below, you do not owe a penalty for underpaying estimated tax.
- Your gross income from farming and fishing is at least ⅔ of your annual gross income from all sources for 2002 or
2003.
- You filed Form 1040 or 1041 and paid the entire tax due by March 1, 2004.
See Pub. 505, Tax Withholding and Estimated Tax, for the definition of gross income from farming and fishing.
If you meet test 1 but not test 2, use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to see
if you owe a penalty. If you do not meet test 1, use Form 2210.
If you have an underpayment, all or part of the penalty for that underpayment will be waived if the IRS determines that:
- In 2002 or 2003, you retired after age 62 or became disabled and your underpayment was due to reasonable cause; or
- The underpayment was due to a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the
penalty.
To request a waiver, do the following.
- Check box A or B in Part II.
- If you checked box B, complete Form 2210 through line 16 (line 32 if you use the regular method) without regard to the waiver.
Write the amount you want waived in parentheses on the dotted line next to line 17 (line 33 for the regular method). Subtract
this amount from the
total penalty you figured without regard to the waiver, and enter the result on line 17 (line 33 for the regular method).
- 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.
- If you are requesting a waiver due to retirement or disability under 1 above, attach documentation that shows your retirement
date (and your age on that date) or the date you became disabled.
- If you are requesting a waiver due to a casualty, disaster, or other unusual circumstance under 2 above, attach documentation
such as copies of police and insurance company reports.
The IRS will review the information you provide and decide whether to grant your request for a waiver.
See Pub. 505 for more details. It has examples of filled-in Forms 2210.
For guidance on figuring estimated taxes for trusts and certain estates, see Notice 87-32, 1987-1 C.B. 477.
