Rate Period 1

Line 32

Enter on line 32, column (a), the number of days from 4/15/02 to the date of the first payment listed in Table 1. If no payments are listed, enter 260.

Example 1.   You had an underpayment of $5,000 on line 30 and your first payment shown in the table was made on 4/30/02 in the amount of $3,000. Enter 15 on line 32, column (a) (days from 4/15 to 4/30).

Line 33

Make the computation requested on line 33 and enter the result. Note that the computation calls for the underpayment on line 30. The amount you use as the underpayment depends on whether or not a payment is listed in Table 1.

If there is a payment listed in Table 1.   On a separate sheet of paper, apply the payment to the underpayment shown on line 30. The underpayment for the computation on line 33 is the amount of the payment applied to the line 30 underpayment. If the payment is more than the underpayment, apply only an amount equal to the underpayment and use that amount for the line 33 computation.

Example 2.   Assume the same facts as in Example 1. Because you paid $3,000 toward the underpayment, enter $7.40 on line 33 ($3,000 × 15/365 × .06).

Example 3.   Your underpayment on line 30 was $5,000 and you paid $8,000 on 4/30/02. Because your payment was more than your underpayment, you would apply $5,000 to the underpayment. Enter $12.33 on line 33 ($5,000 × 15/365 × .06).

If there are no payments listed in Table 1.   The underpayment is the entire underpayment balance.

Determine If You Need To Make Additional Computations for Column (a)

Whether you need to make additional computations depends on which of the following four conditions applies to you.

1. The first (or only) payment listed in Table 1 was enough to reduce the underpayment to zero. There are no further computations to make for column (a). Figure the penalty for any other underpayments shown in columns (b)-(d) of line 30.
2. No payments are listed in Table 1. You will need to figure the penalty for the next rate period. See Rate Period 2 on this page.
3. The payment listed in Table 1 did not reduce the underpayment to zero, and no other payments are listed. Make one more computation for column (a) on lines 32 and 33. This second computation is to figure the penalty on the underpayment balance; that is, the portion of the underpayment that remained unpaid for the entire period. In this case, you would enter another number in the entry space for lines 32 and 33, as follows:
   1. On line 32, enter 260. This is the total number of days in the period. See Total days per rate period on page 3.
   2. On line 33, make the computation and enter the result. In this case, however, the underpayment in the computation is the remaining balance of the underpayment.

      Example 4. Assume the same facts as in Examples 1 and 2. After applying the $3,000 payment, the underpayment balance is $2,000. Line 33, therefore, will contain a second entry of $85.48 ($2,000 × 260/365 × .06). Go to line 34 to figure the penalty on the underpayment balance for Rate Period 2.

4. Additional payments are listed in Table 1 and the first payment was not enough to reduce the underpayment to zero. On line 30, you may list the amounts and the payment dates that apply to the underpayment for that installment period. Then figure the penalty for each amount listed on line 30. If an underpayment balance remains after applying all the payments, figure the penalty on the balance of the underpayment for the entire period. See Total days per rate period on page 3.

Example 5.   Your underpayment for column (a) is $5,000 and you made two payments: $3,000 on 4/30/02 and $2,000 on 6/22/02. On line 30, you can enter $5,000 or enter each payment and date separately which will correspond with the two entries on lines 32 and 33 as explained below.

Line 32 will show two entries in column (a) as follows: 15 days (from 4/15 to 4/30); and 68 days (from 4/15 to 6/22).

Line 33 will show two entries in column (a) as follows: $7.40 ($3,000 × 15/365 × .06) and $22.36 ($2,000 × 68/365 × .06).

Example 6.   Your underpayment on line 30, column (a), is $8,000 and you made two payments: $3,000 on 4/30/02 and $3,000 on 6/22/02. Lines 32 and 33 will each show three entries in column (a); one for each payment, and a third for the underpayment balance of $2,000 ($8,000 minus $6,000).

Line 32 will show 15 days (from 4/15 to 4/30); 68 days (from 4/15 to 6/22); and 260 days (from 4/15/02 to 12/31/02).

Line 33 will show $7.40, $33.53, and $85.48, computed as follows: $3,000 × 15/365 × .06 (first payment), $3,000 × 68/365 × .06 (second payment), and $2,000 × 260/365 × .06 (remaining underpayment balance).

Then figure the penalty for Rate Period 2 (lines 34 and 35) on the remaining $2,000 balance.

Rate Period 2

If an underpayment balance remains after applying any payments in Table 1, figure the penalty attributable to that balance on lines 34 and 35. Generally, use the same steps as explained under the instructions for Rate Period 1. But use the dates and interest rate shown on lines 34 and 35 and use only the payments listed in Table 2.

Line 34

Enter on line 34, column (a), the number of days from 12/31/02 to the date of the first payment listed in Table 2. If no payments are listed in Table 2, enter 105.

Line 35

Figure line 35 in the same manner as explained for line 33, except use 5% instead of 6%.

Schedule AI - Annualized Income Installment Method

If your income varied during the year because, for example, you operated your business on a seasonal basis, you may be able to lower or eliminate the amount of one or more required installments by using the annualized income installment method. Use Schedule AI to figure the required installments to enter on line 23 of Form 2210.

If you use Schedule AI for any payment due date, you must use it for all payment due dates. To figure the amount of each required installment, Schedule AI automatically selects the smaller of the annualized income installment or the regular installment (increased by the amount saved by using the annualized income installment method in figuring any earlier installments).

To use the annualized income installment method, you must do all three of the following.

1. Enter the amount from Schedule AI, line 25, in each column of line 23 of Form 2210.
2. Check the box on line 1b.
3. Attach both Form 2210 and Schedule AI to your return.

Additional Information

See Pub. 505 for more details about the annualized income installment method, and a completed example. Estates and trusts with short tax years, see Notice 87-32.

Form 1040NR or 1040NR-EZ Filers

If you are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U.S. income tax withholding, the instructions for Schedule AI are modified as follows.

1. Skip column (a).
2. Enter on line 1 your income for the period that is effectively connected with a U.S. trade or business.
3. Increase the amount on line 17 by the amount determined by multiplying your income for the period that is not effectively connected with a U.S. trade or business by the following.
   • In column (b), 72%.
   • In column (c), 45%.
   • In column (d), 30%.

   However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2.4, 1.5, and 1, respectively.

4. Enter in line 22, column (b), ½ of the amount from line 15 on page 1 of Form 2210. In columns (c) and (d), enter 1/4 of that amount.
5. Skip column (b), lines 20 and 23.

Part I - Annualized Income Installments

Line 1

Figure your total income for the period minus your adjustments to income for the period. Include your share of partnership or S corporation income or loss items for the period.

If you are self-employed, be sure to take into account the deduction for one-half of your self-employment tax. To figure this amount for each period, complete Part II of Schedule AI and divide the amount in each column on line 34 by 8, 4.8, 3, and 2, respectively.

Line 2

Estates and trusts, do not use the amounts shown in columns (a)-(d). Instead, use 6, 3, 1.71429, and 1.09091, respectively, as the annualization amounts.

Line 6

Multiply line 4 by line 5 and enter the result on line 6. But if line 3 is more than $137,300 ($68,650 if married filing separately), use the following worksheet to figure the amount to enter on line 6.

1.	Enter the amount from Schedule AI, line 4
2.	Enter the amount included on line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses
3.	Subtract line 2 from line 1
4.	Enter the number from Schedule AI, line 5
5.	Multiply the amount on line 1 by line 4
	Note: If the amount on line 3 is zero, stop here and enter the amount from line 5 on Schedule AI, line 6.
6.	Multiply the amount on line 3 by the number on line 4
7.	Multiply the amount on line 6 by .80
8.	Enter the amount from Schedule AI, line 3
9.	Enter $137,300 ($68,650 if married filing separately)
10.	Subtract line 9 from line 8
11.	Multiply the amount on line 10 by .03
12.	Enter the smaller of line 7 or line 11
13.	Subtract line 12 from line 5. Enter the result here and on Schedule AI, line 6

Line 10

Multiply $3,000 by your total exemptions. But if line 3 is more than the amount shown for your filing status in the table below, use the following worksheet to figure the amount to enter on line 10.

Single	$137,300
Married filing jointly or qualifying widow(er)	$206,000
Married filing separately	$103,000
Head of household	$171,650

1.	Enter the amount from Schedule AI, line 3
2.	Enter the amount shown for your filing status from the above table
3.	Subtract line 2 from line 1
4.	Divide the amount on line 3 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next whole number
5.	Multiply the number on line 4 by .02. Enter the result as a decimal but not more than 1
6.	Multiply $3,000 by your total exemptions
7.	Multiply the amount on line 6 by the decimal on line 5
8.	Subtract line 7 from line 6. Enter the result here and on Schedule AI, line 10

Line 12

To compute the tax, use the Tax Table, Tax Rate Schedules, Capital Gain Tax Worksheet, Schedule D or J, or Form 8615.

Line 14

Enter all of the other taxes you owed because of events that occurred during the months shown in the column headings. Include the same taxes used to figure line 3 of Form 2210 (except self-employment tax), the tax from Form 4972, Tax on Lump-Sum Distributions, and any alternative minimum tax (AMT). Individuals, use Form 6251, Alternative Minimum Tax - Individuals, to figure AMT; estates and trusts, use Schedule I of Form 1041, U.S. Income Tax Return for Estates and Trusts. Figure alternative minimum taxable income based on your income and deductions during the period shown in the column headings. Multiply this amount by the annualized amounts shown on line 2 before subtracting the AMT exemption.

Line 16

Enter the credits you are entitled to because of events that occurred during the months shown in the column headings. Do not annualize any credit. However, when figuring your credits, you must annualize any item of income or deduction used to figure the credit. For details, see Rev. Rul. 79-179, 1979-1 C.B. 436.

Part II - Annualized Self-Employment Tax

If you had net earnings from self-employment during any period, complete Part II for that period to figure your annualized self-employment tax.

If you are married and filing a joint return and both you and your spouse had net earnings from self-employment, complete a separate Part II for each spouse. Enter on line 13 the combined amounts from line 34 of both Parts II.

Line 26

To figure your net earnings from self-employment on line 26, multiply your net profit from all trades or businesses for each period by 92.35%. If you completed the 2002 Annualized Estimated Tax Worksheet on pages 25 and 26 of Pub. 505 (Rev. December 2001), carry the amounts from line 26 of that worksheet to line 26 of Schedule AI.

Paperwork Reduction Act Notice.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average times are:

	Short Method	Regular Method
Recordkeeping	19 min.	13 min.
Learning about the law or the form	15 min.	31 min.
Preparing the form	39 min.	2 hr., 3 min.
Copying, assembling, and sending the form to the IRS	20 min.	45 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

Previous | First

Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home