Publication 505

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## Short Method for Figuring the Penalty (Part III)(p50) |

You may be able to use the short method in Part III of Form 2210
to figure your penalty for underpayment of estimated tax. If you qualify to use
this method, it will result in the same penalty amount as the regular method.
However, either the annualized income installment method or the actual
withholding method, explained later, may result in a smaller penalty.

You can use the short method only if you meet one of the following
requirements.

If you do not meet either requirement, figure your penalty using
the regular method in Part IV of Form 2210 and the Penalty Worksheet in the
instructions.

You cannot use the short method if any of the following apply.

If you use the short method, you cannot use the annualized
income installment method to figure your underpayment for each payment period.
Also, you cannot use your actual withholding during each period to figure your
payments for each period. These methods, which may give you a smaller penalty
amount, are explained on page 51 under
Figuring Your Underpayment (Part IV, Section A). |

## Completing Part III.(p50) |

Complete Part III of Form 2210 following the line-by-line instructions.

First, figure your total underpayment for the year (line 14)
by subtracting the total of your withholding and estimated tax payments (line
13) from your required annual payment (line 10). Then figure the penalty you
would owe if the underpayment remained unpaid through April 15, 2011. This
amount (line 15) is the maximum estimated tax penalty on your underpayment.

Next, figure any part of the maximum penalty you do not owe (line
16) because your underpayment was paid before the due date of your return. For
example, if you filed your 2010 return and paid the tax balance on March 31,
2011, you do not owe the penalty for the 15-day period from April 1 through
April 15. Therefore, you would figure the amount to enter on line 16 using 15
days.

Finally, subtract from the maximum penalty amount (line 15) any
part you do not owe (line 16). The result (line 17) is the penalty you owe.
Enter that amount on line 77 of Form 1040 or line 49 of Form 1040A. Attach Form
2210 to your return only if you checked one of the boxes in Part II.

taxmap/pubs/p505-023.htm#en_us_publink1000207512Assume the same facts for Ivy Fields as in the previous
example
on this page. Ivy paid her estimated tax payments in four installments of $1,000
each on the dates it was due ($4,000 total).

Ivy qualifies to use the short method to figure her estimated
tax penalty. Using the annualized income installment method or actual
withholding will not give her a smaller penalty amount because her income and
withholding were distributed evenly throughout the year. Therefore, she figures
her penalty in Part III of Form 2210 (see
Figure 4-A
*(Continued)* on page 56) and leaves Part IV (not shown) blank.

Ivy figures her $6,800 total underpayment for the year (line
14) by subtracting the total of her withholding and estimated tax payments
($5,600) from her $12,400 required annual payment (line 10). The maximum penalty
on her underpayment (line 15) is $162 ($6,800 × .02383).

Ivy plans to file her return and pay her $15,946 tax balance
on March 31, 2011, 15 days before April 15. Therefore, she does not owe part of
the maximum penalty amount. The part she does not owe (line 16) is figured as
follows.

$6,800 × 15 × .00008 = $8 |

Ivy subtracts the $8 from the $162 maximum penalty and enters
the result, $154, on Form 2210, line 17, and on Form 1040, line 77. She adds
$154 to her $15,946 tax balance and enters the result, $16,100, on line 76 of
her Form 1040. Ivy files her return on March 31 and encloses a check for
$16,100. Because Ivy did not check any of the boxes in Part II, she does not
attach Form 2210 to her tax return.

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