Figuring Your Required Annual Payment

Figure your required annual payment in Part II of Form 2210, following the line-by-line instructions. If you rounded the entries on your return to whole dollars, you can round on Form 2210.

Example 4.4. The tax on Ivy Fields' 1999 return was $10,000 (her AGI was not more than $150,000). The tax on her 2000 return (Form 1040, line 40) is $11,000. She does not claim any credits or pay any other taxes.

For 2000, Ivy had $1,600 income tax withheld and paid $6,800 estimated tax. Her total payments were $8,400. 90% of her 2000 tax is $9,900. Because she paid less than her 1999 tax and less than 90% of her 2000 tax, and does not meet an exception, Ivy knows that she owes a penalty for underpayment of estimated tax. She decides to figure the penalty on Form 2210 and pay it with her $2,600 tax balance when she files her tax return.

Ivy's required annual payment (Part II, line 14) is $9,900 ($11,000 x 90%) because that is smaller than her 1999 tax.

Ivy's filled-in Form 2210 is shown at the end of this chapter.

Different 1999 filing status. If you file a separate return for 2000, but you filed a joint return with your spouse for 1999, see 1999 joint return and 2000 separate returns, earlier, to figure the amount to enter as your 1999 tax on line 13 of Form 2210.

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