Instructions for Form 2220 |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Part I. Required Annual Payment
Complete lines 1 through 5 to figure the corporation's required annual payment.
Line 1.
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 1. Instead,
write “ Sec. 338 gain”
and show the amount of tax in brackets on the dotted line next to line 1. This exclusion from the line 1 amount does not apply
if a section 338(h)(10)
election is made.
Note.
For information on how to figure the total tax for estimated tax purposes, see the following forms or their instructions.
• 990-PF
|
• 1120-FSC
|
• 1120-REIT
|
• 990-T
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• 1120-L
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• 1120-RIC
|
• 1120-C
|
• 1120-ND
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• 1120S
|
• 1120-F
|
• 1120-PC
|
• 1120-SF
|
Line 2c.
Enter the amount from line 32f(2), Form 1120; line 28f(2), Form 1120-A; or the applicable line for other income tax
returns.
Line 4. All filers (other than S corporations).
Figure the corporation's 2005 tax the same way the amount on line 3 of this form was determined, using the taxes and
credits from its 2005 tax
return. However, skip line 4 and enter on line 5 the amount from line 3 if either of the following applies.
S corporations.
Enter on line 4 the sum of:
-
The total of the investment credit recapture tax and the built-in gains tax shown on the return for the 2006 tax year and
-
Any excess net passive income tax shown on the S corporation's return for the 2005 tax year.
If the 2005 tax year was less than 12 months, skip line 4 and enter on line 5 the amount from line 3.
Part II. Reasons for Filing
Lines 6 and 7. 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 (if applicable),
-
The annualized income installment (if applicable), or
-
The regular installment under section 6655(d)(1) (increased by any recapture of a reduction in a required installment 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 in Part II on line 6 and complete
Parts I and III
of Schedule A.
-
If the corporation is using only the annualized income installment method, check the box in Part II on line 7 and complete
Parts II and III
of Schedule A.
-
If the corporation is using both methods, check the boxes in Part II on lines 6 and 7 and complete all three parts of Schedule
A.
Line 8. 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 2006 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 carryovers.
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 in Part II on line 8 and, if applicable, check the box(es)
in Part II on line 6 and/or
line 7. Also, if applicable, complete Parts I, II, and III of Schedule A, as discussed on this page.
Part III. Figuring the Underpayment
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.
Corporations eligible for relief extension through October 16, 2006.
For certain corporations affected by Hurricane Katrina, the due dates for any required installments of estimated tax
originally due April 15, 2006,
June 15, 2006, and September 15, 2006, were further extended until October 16, 2006.
For each installment with an extended due date of October 16, 2006, enter 10/16/06 on line 9 instead of the original
due date. If multiple columns
have the same date, skip lines 10 through 33 of the first of those columns. On lines 10 and 11, for the last column, enter
the sum of the amounts that
would have otherwise been entered for all the columns with the same due date.
In addition, identify an affected corporation as a hurricane victim eligible for relief extension through October
16, 2006, by writing “ Hurricane
Katrina” in red ink at the top of both the corporation's income tax return and Form 2220, if required to be filed. For more information
about
corporations eligible for relief extension through October 16, 2006, see News Release IR 2006-135 and Notice 2006-56. IRS
news releases are available
at
www.irs.gov
Line 10.
If multiple columns have the same due date, see the instructions for line 9. Large corporations, follow the instructions
below.
-
If the box on line 8 (but not line 6 or line 7) is checked and line 3 is smaller than line 4, enter 25% of line 3 in columns
(a) through (d)
of line 10.
-
If the box on line 8 (but not line 6 or line 7) is checked and line 4 is smaller than line 3, enter 25% of line 4 in column
(a) of line 10.
In column (b), figure the amount to enter as follows:
-
Subtract line 4 from line 3,
-
Add the result to the amount on line 3, and
-
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 3.
-
If the box on line 8 and the box on line 6 and/or line 7 are checked, follow the instructions in items 1 and 2 above by substituting
Schedule A, line 35 for line 10 and complete the rest of Schedule A, Part III.
Exception for corporations with assets of $1 billion or more.
Corporations with assets of $1 billion or more (as of the end of the prior tax year) with payments due in July, August,
or September of 2006 were
required to increase payments to 105% (26.25% instead of 25%) of the payment otherwise due and to reduce the next required
payment to 95% (23.75%
instead of 25%).
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 2005
tax return that was credited to the corporation's 2006 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. If multiple columns have the same due date, see the instructions for line 9.
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 IV to figure the penalty.
Part IV. Figuring the Penalty
Complete lines 19 through 34 to determine the amount of the penalty. The penalty is figured for the period of underpayment
using the underpayment
rate determined under section 6621(a)(2). The period of underpayment runs from the installment due date to the earlier of
the date the underpayment is
actually paid or the 15th day of the third month after the close of the 2006 tax year. For information on obtaining the interest
rate on underpayments
paid after March 31, 2007, see the footnote on page 2 of Form 2220.
Line 19.
A payment of estimated tax is applied against unpaid required installments in the order in which 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 June
10, 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 from April 15 to June 10 (56 days). The remaining $1,500 is applied to the June 15 installment.
If the corporation has made more than one payment for a required installment, attach a separate computation for each
payment.
Part I. Adjusted Seasonal Installment Method
The corporation can 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 total taxable
income for each of the 3
preceding tax years, respectively. Figure the base period percentage using the 6-month period in which the corporation normally
receives the largest
part of its taxable income.
Example.
An amusement park with a 2006 calendar tax year receives the largest part of its taxable income during the 6-month period
from May through October.
To compute its base period percentage for this 6-month period in 2006, the amusement park figures its taxable income for each
May-October period
in 2003, 2004, and 2005. 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 2003, 74% (.74) for May-October 2004, and 67% (.67) for May-October
2005. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May-October 2006 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 AMT exemption amount under section 55(d). Enter on line
15, column (d), the AMT
determined for column (d). For columns (a) through (c) only, first multiply the AMT determined by the amounts shown in columns
(a) through (c) of line
13 and then enter on line 15 the result for each column.
Line 16.
Enter on line 16 any other taxes the corporation owed for the months shown in each column heading directly above line
1. Include the same taxes
used to figure Part I, line 1 of Form 2220, but do not include the personal holding company tax and interest due under the
look-back method of section
460(b)(2) for completed long-term contracts or section 167(g)(2) 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 heading above line 1.
Part II. Annualized Income Installment Method
Line 20. Annualization periods.
Enter on line 20, columns (a) through (d), respectively, the annualization periods for the option shown in the tables
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 the options shown in the table below for
these entities.
Corporations' Annualization Options. Summary: This table is used to provide the options of annualized installment periods elected by corporations to be entered
on line 20 of
Schedule A (Form 2220).
Tax-Exempt Organizations and Private Foundations: Annualization Options. Summary: This table is used to provide the options of annualized installment periods elected by tax-exempt organizations and
private
foundations to be entered on line 22 of Schedule A (Form 2220).
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 shown in the tables below for the
option used for 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.
Corporations' Annualization Options. Summary: This table is used to provide the options of annualized installment periods elected by corporations to be entered
on line 22 of
Schedule A (Form 2220).
Tax-Exempt Organizations and Private Foundations: Annualization Options. Summary: This table is used to provide the options of annualized installment periods elected by tax-exempt organizations and
private
foundations to be entered on line 22 of Schedule A (Form 2220).
Line 25.
Compute the alternative minimum tax (AMT) on Form 4626, if applicable. Figure alternative minimum taxable income (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 AMT exemption amount under section 55(d). Enter on line 25 the result
for each column.
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 Part I, line 1 of
Form 2220, but do not include the personal holding company tax and interest due under the look-back method of section 460(b)(2)
for completed
long-term contracts or section 167(g)(2) 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.
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.
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