2003 HTML Instructions for Form 2220,

This is archived information that pertains only to the 2003 Tax Year. If you
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Table of Contents

Part I—Reasons for Filing

Lines 1 and 2. Adjusted seasonal installment method and/or annualized income installment method. If the corporation's income varied during the year because, for example, it operated its business on a seasonal basis, it may be able to lower or eliminate the amount of one or more required installments by using the adjusted seasonal installment method and/or the annualized income installment method.

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.

Use Schedule A on pages 3 and 4 of Form 2220 to figure one or more required installments. If Schedule A is used for any payment due date, it must be used for all payment due dates. To arrive at the amount of each required installment, Schedule A automatically selects the smallest of:

The adjusted seasonal installment,
The annualized income installment (if applicable), or
The regular installment under section 6655(d) (increased by any reduction recaptured under section 6655(e)(1)(B)).

Follow the steps below to determine which parts of the form have to be completed.

If the corporation is using only the adjusted seasonal installment method, check the box on line 1 of Part I and complete Parts I and III of Schedule A.
If the corporation is using only the annualized income installment method, check the box on line 2 of Part I and complete Parts II and III of Schedule A.
If the corporation is using both methods, check the boxes on lines 1 and 2 of Part I and complete all three parts of Schedule A.

Line 3. Large corporations. A large corporation is a corporation (other than an S corporation) that had, or whose predecessor had, taxable income (defined below) of $1 million or more for any of the 3 tax years immediately preceding the current tax year. A large corporation includes a “large organization” as defined in the instructions for Form 990-W.

Taxable income, for this purpose, is modified to exclude net operating loss and capital loss carrybacks and carryforwards. Members of a controlled group, as defined in section 1563, must divide the $1 million amount among themselves under rules similar to those in section 1561.

If the corporation is a large corporation, check the box on line 3 and, if applicable, check the box(es) on line 1 and/or line 2. Also, if applicable, complete Parts I, II, and III of Schedule A, as discussed above.

Part II—Figuring the Underpayment

Line 4. Generally, enter the tax from line 31, Form 1120; line 27, Form 1120-A; or the applicable line for other income tax returns. However, if that amount includes any tax attributable to a sale described in section 338(a)(1), do not include that tax on line 4. Instead, write “Sec. 338 gain” and show the amount of tax in brackets on the dotted line next to line 4.

Filers of Forms 990-PF, 990-T, 1120-F, 1120-L, 1120-ND, 1120-PC, 1120-REIT, 1120-RIC, 1120S, and 1120-SF. See the instructions for the appropriate tax return for the definition of tax for estimated tax purposes.

Line 5c. Enter the amount from line 32g, Form 1120; line 28g, Form 1120-A; or the applicable line for other income tax returns.

Line 7. All filers (other than S corporations). Figure the corporation's 2002 tax the same way the amount on line 6 of this form was determined, using the taxes and credits from its 2002 tax return. But skip line 7 and enter the amount from line 6 on line 8 if:

The corporation did not file a tax return for 2002 that showed a liability for at least some amount of tax or
The corporation had a 2002 tax year of less than 12 months.

S corporations. Enter on line 7 the sum of:

The total of the investment credit recapture tax and the built-in gains tax (or the tax on certain capital gains) shown on the return for the 2003 tax year and
Any excess net passive income tax shown on the S corporation's return for the 2002 tax year.

If the 2002 tax year was less than 12 months, skip line 7 and enter the amount from line 6 on line 8.

Line 9. The corporation is generally required to enter the 15th day of the 4th (Form 990–PF filers: Use the 5th month), 6th, 9th, and 12th months of its tax year. However, if one of those dates is September 15, 2003, or September 15, 2004, the corporation must complete two columns for that due date (as explained below). All other filers will complete only four columns (columns (a) through (d)) of Part II and in column (d) they will enter “N/A” on lines 16 and 18.

If one of the regularly scheduled installment due dates is September 15, 2003, complete two columns for that installment. On line 9, enter September 15, 2003, in the first of the two columns, and October 1, 2003, in the second of the two columns. On line 10, enter 75% of the total required installment in the first of the two columns, and the remaining 25% in the second of the two columns.

If one of the regularly scheduled installment due dates is September 15, 2004, complete two columns for that installment. On line 9, enter September 15, 2004, in the first of the two columns, and October 1, 2004, in the second of the two columns. On line 10, enter 80% of the total required installment in the first of the two columns, and the remaining 20% in the second of the two columns.

Line 10. Large corporations, follow the instructions below.

If the box on line 3 (but not line 1 or line 2) is checked and line 6 is smaller than line 7, enter 25% of line 6 in columns (a) through (d) of line 10.
If the box on line 3 (but not line 1 or line 2) is checked and line 7 is smaller than line 6, enter 25% of line 7 in column (a) of line 10. In column (b), figure the amount to enter as follows:
1. Subtract line 7 from line 6,
2. Add the result to the amount on line 6, and
3. 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 6.
If the box on line 3 and the box on line 1 and/or line 2 are checked, follow the instructions in items 1 and 2 above by substituting line 35 of Schedule A for line 10 and complete the rest of Part III of Schedule A.

Line 11. Enter the estimated tax payments made by the corporation for its tax year as indicated below. Include any overpayment from the corporation's 2002 tax return that was credited to the corporation's 2003 estimated tax. If an installment is due on a Saturday, Sunday, or legal holiday, payments made on the next day that is not a Saturday, Sunday, or legal holiday are considered made on the due date to the extent the payment is applied against that required installment.

Column (a). Enter payments made by the date on line 9, column (a).
Columns (b), (c), and (d). Enter payments made by the date on line 9 for that column and after the date on line 9 of the preceding column.

Line 17. If any of the columns in line 17 shows an underpayment, complete Part III to figure the penalty.

Part III—Figuring the Penalty

Complete lines 19 through 36 to determine the amount of the penalty. The penalty is figured for the period of underpayment determined under section 6655 using the underpayment rate determined under section 6621(a)(2). For information on obtaining the interest rate on underpayments paid after March 31, 2004, see the footnote on page 2 of Form 2220.

Line 19. A payment of estimated tax is applied against underpayments of required installments in the order that installments are required to be paid, regardless of the installment to which the payment pertains.

Example.

A corporation underpaid the April 15 installment by $1,000. The June 15 installment requires a payment of $2,500. On Monday, June 16, 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 to June 16 (62 days). The remaining $1,500 is applied to the June 15 installment as if it were made on June 15.

If the corporation has made more than one payment for a required installment, attach a separate computation for each payment.

Schedule A

Part I—Adjusted Seasonal Installment Method

The corporation may 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 taxable income for each of their respective tax years.

Example.

An amusement park with a 2003 calendar tax year receives the largest part of its taxable income during a 6-month period, May through October. To compute its base period percentage for this 6-month period, the amusement park figures its taxable income for the period May-October in 2000, 2001, and 2002. 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 2000, 74% (.74) for May-October 2001, and 67% (.67) for May-October 2002. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May through October 2003 is 70%. Therefore, the amusement park qualifies for the adjusted seasonal installment method.

Line 15. Compute the alternative minimum tax (AMT) on Form 4626, Alternative Minimum Tax-Corporations, if applicable. Figure alternative minimum taxable income (AMTI) based on the corporation's income and deductions for the months shown in the column headings directly above line 1. For each column, divide the AMTI by the amount shown on line 8 before subtracting the exemption amount under section 55(d). For columns (a) through (c) only, multiply the AMT determined by the amounts shown on line 13.

Line 16. Enter any other taxes the corporation owed for the months shown in each column directly above line 1. Include the same taxes used to figure line 4, Part II, of Form 2220, but do not include the personal holding company tax or interest due under the look-back method of section 460(b)(2) for completed long-term contracts or section 167(g) for property depreciated under the income forecast method.

Line 18. Enter the credits the corporation is entitled to for the months shown in each column above line 1.

Part II—Annualized Income Installment Method

Line 20—Annualization periods. Enter on line 20, columns (a) through (d), respectively, the annualization amounts for the option listed below. For example, if the corporation elected Option 1, enter on line 20 the annualization periods 2, 4, 7, and 10, in columns (a) through (d), respectively.

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 Form 990-W.

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Line 21. Enter on line 21 the taxable income (line 30, Form 1120; line 26, Form 1120-A; or the applicable line for other income tax returns) that the corporation received for the months entered for each annualization period in columns (a) through (d) on line 20.

Line 22—Annualization amounts. Enter on line 22, columns (a) through (d), respectively, the annualization amounts for the option used on line 20 above. For example, if the corporation elected Option 1, enter on line 22 the annualization amounts 6, 3, 1.71429, and 1.2, in columns (a) through (d), respectively.

Line 25. Compute the AMT on Form 4626, if applicable. Figure AMTI based on the corporation's income and deductions for the annualization period entered in each column on line 20. Multiply AMTI by the annualization amounts (line 22) used to figure annualized taxable income before subtracting the exemption amount under section 55(d).

Line 26. Enter any other taxes the corporation owed for the months shown in each column on line 20. Include the same taxes used to figure line 4, Part II, of Form 2220, but do not include the personal holding company tax or interest due under the look-back method of section 460(b)(2) for completed long-term contracts or section 167(g) for property depreciated under the income forecast method.

Line 28. Enter the credits the corporation is entitled to for the months shown in each column on line 20. Do not annualize any credit. However, when figuring the credits, 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 III—Required Installments

Line 33. Before completing line 33 in columns (b) through (d), complete lines 34 through 38 in each of the preceding columns. For example, complete lines 34 through 38 in column (a) before completing line 33 in column (b).

Line 38. For each installment, enter the smaller of line 34 or line 37 on line 38. Also enter the result on line 10, page 1. However, if one of the required installments to be entered on line 10 is for September 2003 or September 2004, see the second or third paragraph of the instructions for line 9 before entering an amount on line 10.

Specific Instructions