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IRS.gov Website
Publication 505
taxmap/pubs/p505-021.htm#en_us_publink1000207498

Exceptions(p49)

rule
Generally, you do not have to pay an underpayment penalty if either:
taxmap/pubs/p505-021.htm#en_us_publink1000207499

Less Than $1,000 Due(p49)

rule
You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000.
taxmap/pubs/p505-021.htm#en_us_publink1000207500

Total tax for 2010.(p49)

rule
For 2010, your total tax on Form 1040 is the amount on line 60 reduced by the following.
  1. Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57).
  2. Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans.
  3. The following write-ins on line 60:
    1. Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance (identified as "UT"),
    2. Tax on excess golden parachute payments (identified as "EPP"),
    3. Excise tax on insider stock compensation from an expatriated corporation (identified as "ISC"),
    4. Look-back interest due under section 167(g) (identified as "From Form 8866"),
    5. Look-back interest due under section 460(b) (identified as "From Form 8697"),
    6. Recapture of federal mortgage subsidy (identified as "FMSR"), and
    7. Additional tax on advance payments of health coverage tax credit when not eligible (identified as "HCTC").
  4. Any refundable credit amounts listed on lines 63, 64a, 65, 66, 67, and 70, and credits from Forms 8801, 8839, and 8885 included on line 71.
If you filed Form 1040A, your 2010 total tax is the amount on line 37 reduced by any refundable credits on lines 40, 41a, 42, and 43.
If you filed Form 1040EZ, your 2010 total tax is the amount on line 11 reduced by the amount on lines 8 and 9a.
taxmap/pubs/p505-021.htm#en_us_publink1000207501

Paid through withholding.(p49)

rule
For 2010, the amount you paid through withholding on Form 1040 is the amount on line 61 plus any excess social security or tier 1 RRTA tax withholding on line 69. Add to that any write-in amount on line 72 identified as "Form 8689." On Form 1040A, the amount you paid through withholding is the amount on line 38 plus any excess social security or tier 1 RRTA tax withholding included on line 44. On Form 1040EZ, it is the amount on line 7.
taxmap/pubs/p505-021.htm#en_us_publink1000207502

No Tax Liability Last Year(p49)

rule
You do not owe a penalty if you had no tax liability last year and you were a U.S. citizen or resident for the whole year. For this rule to apply, your tax year must have included all 12 months of the year.
You had no tax liability for 2009 if your total tax was zero or you were not required to file an income tax return.
taxmap/pubs/p505-021.htm#en_us_publink1000207503

Example.(p49)

Ray, who is single and 22 years old, was unemployed for a few months during 2009. He earned $6,700 in wages before he was laid off, and he received $3,400 in unemployment compensation afterwards. He had no other income. Even though he had gross income of $7,700 ($2,400 of unemployment compensation was excluded from income in 2009), he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,350 for 2009). He filed a return only to have his withheld income tax refunded to him.
In 2010, Ray began regular work as an independent contractor. Ray made no estimated tax payments in 2010. Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2010 because he had no tax liability in 2009.
taxmap/pubs/p505-021.htm#en_us_publink1000207504

Total tax for 2009.(p49)

rule
For 2009, your total tax on Form 1040 is the amount on line 60 reduced by the following.
  1. Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57).
  2. Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans.
  3. The following write-ins on line 60:
    1. Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance (identified as "UT"),
    2. Tax on excess golden parachute payments (identified as "EPP"),
    3. Excise tax on insider stock compensation from an expatriated corporation (identified as "ISC"),
    4. Look-back interest due under section 167(g) (identified as "From Form 8866"),
    5. Look-back interest due under section 460(b) (identified as "From Form 8697"),
    6. Recapture of federal mortgage subsidy (identified as "FMSR"), and
    7. Additional tax on advance payments of health coverage tax credit when not eligible (identified as "HCTC").
  4. Any refundable credit amounts listed on lines 63, 64a, 65, 66, and 67, and credits from Forms 4136, 8801, and 8885 included on line 70.
If you filed Form 1040A, your 2009 total tax is the amount on line 37 reduced by any refundable credits on lines 40, 41a, 42, and 43.
If you filed Form 1040EZ, your 2009 total tax is the amount on line 11 reduced by the amount on lines 8 and 9a.
Note. If you are a household employer, include your household employment taxes (prior to subtracting advanced EIC payments made to your employee(s)) only if you had federal income tax withheld from your income and would be required to make estimated tax payments even if the household employment taxes were not included.