Publication 505

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## Regular Method for Figuring the Penalty (Part IV)(p50) |

You can use the regular method in Part IV of Form 2210 to figure
your penalty for underpayment of estimated tax if you paid one or more estimated
tax payments earlier than the due date.

You must use the regular method in Part IV of Form 2210 to figure
your penalty for underpayment of estimated tax if any of the following apply to
you.

- You paid one or more estimated tax payments on a date after the due date.
- You paid at least one, but less than four, installments of estimated tax.
- You paid estimated tax payments in un-

equal amounts. - You use the annualized income installment method to figure your underpayment for each payment period.
- You use your actual withholding during each payment period to figure your payments.

Under the regular method, figure your underpayment for each payment
period in Section A, then figure your penalty using the Penalty Worksheet in the
Instructions for Form 2210. Enter the results on line 27 of Section B.

taxmap/pubs/p505-024.htm#en_us_publink1000207515## Figuring Your Underpayment |

Figure your underpayment of estimated tax for each payment period
in Section A following the line-by-line instructions. Complete lines 20 through
26 of the first column before going to line 20 of the next column.

taxmap/pubs/p505-024.htm#en_us_publink1000207516## Required installments—line 18.(p51) |

Your required payment for each payment period (line 18) is usually
one-fourth of your required annual payment (Part I, line 9). This
method—the regular method—is the one to use if you received your
income evenly throughout the year.

However, if you did not receive your income evenly throughout
the year, you may be able to lower or eliminate your penalty by figuring your
underpayment using the annualized income installment method. First complete
Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on
line 18 of Form 2210, Part IV. See
Annualized Income Installment Method (Schedule AI) on page 52.

taxmap/pubs/p505-024.htm#en_us_publink1000207517## Payments made—line 19.(p51) |

Enter in each column the total of:
For special rules for figuring your payments, see Form 2210
instructions for line 19.

If you file Form 1040, your withholding is the amount on line
61, plus any excess social security or tier 1 RRTA tax withholding on line 69.
If you file Form 1040A, your withholding is the amount on line 38 plus any
excess social security or tier 1 RRTA tax withholding included in line 44.

taxmap/pubs/p505-024.htm#en_us_publink1000207518Actual withholding method.(p51) |

Instead of using one-fourth of your withholding for each quarter,
you can choose to use the amounts actually withheld by each due date. You can
make this choice separately for the tax withheld from your wages and for all
other withholding. This includes any excess social security and tier 1 RRTA tax
withheld.

Using your actual withholding may result in a smaller penalty
if most of your withholding occurred early in the year.

If you use your actual withholding, you must check box D in Form
2210, Part II. Then complete Form 2210 using the regular method (Part IV) and
file it with your return.

taxmap/pubs/p505-024.htm#en_us_publink1000256319Example—regular method.(p51) |

Ben and Sally Brown's 2010 tax after credits is $6,871 (Form
1040, line 55). Ben owes self-employment tax of $1,413. Their 2009 AGI was less
than $150,000. They do not owe any other taxes. Their only credit is the making
work pay credit of $800. Their 2009 tax was $8,116. Go to
Figure 4-B on page 57 to see Ben and Sally's completed Form 2210, Part
I.

Ben's employer withheld $1,220 income tax and Sally's withheld
$364 during 2010 ($1,584 total withholding). They paid no estimated tax for
either the first or second period, but they paid $950 each on September 15,
2010, and January 15, 2011, for the third and fourth periods. Because the total
of their withholding and estimated tax payments, $3,484 ($1,584 + $950 + $950),
was less than both 90% of their 2010 tax (90% x $7,484 = $6,736) and 100% of
their 2009 tax ($8,116), they owe a penalty for underpayment of estimated tax.
They decide to figure the penalty on Form 2210 and pay it with their $4,400 tax
balance ($7,484 - $3,484) when they file their tax return on April 18, 2011.

Their required annual payment (Part I, line 9) is $6,736. Because
their income and withholding were distributed evenly throughout the year, they
enter one-fourth of their required annual payment, $1,684, in each column of
line 18 (go to
Figure 4-B
*(Continued)*
on page 58). On line 19, they enter one-fourth of their withholding, $396, in
the first two columns and $1,346 ($396 withholding (WH) + $950 estimated tax
payment (EST)) in the last two columns.

They have an underpayment (line 25) for each payment period.

taxmap/pubs/p505-024.htm#en_us_publink1000207531## Worksheet for Form 2210, Part IV, Section B—Figuring Your Penalty(p51) |

Figure the amount of your penalty for Section B using the Penalty
Worksheet in the Form 2210 instructions. The penalty is imposed on each
underpayment shown in Section A, line 25, for the number of days that it
remained unpaid.

For 2010, there are two rate periods—the 4% rate is in
effect from April 16, 2010, through December 31, 2010, and the 3% rate is in
effect from January 1, 2011, through April 15, 2011. Use the Penalty Worksheet
to figure the penalty and enter the result in Section B, line 27 of Form 2210.

taxmap/pubs/p505-024.htm#en_us_publink1000248777## Payments.(p51) |

Before completing the Penalty Worksheet, it may be helpful to
make a list of the payments you made and income tax withheld after the due date
(or the last day payments could be made on time) for the earliest payment period
an underpayment occurred. For example, if you had an underpayment for the first
payment period, list your payments after April 15, 2010. You can use the table
in the Form 2210 instructions to make your list. Follow those instructions for
listing income tax withheld and payments made with your return. Use the list to
determine when each underpayment was paid.

If you mail your estimated tax payments, use the date of the
U.S. postmark as the date of payment.

taxmap/pubs/p505-024.htm#en_us_publink1000249015## Line 1b.(p51) |

Apply the payments listed to underpayment balance in the first column until it
is fully paid. Apply payments in the order made.

taxmap/pubs/p505-024.htm#en_us_publink1000248800Example 1.(p51) |

In the previous example for Ben and Sally Brown (see
*Example—regular method* under
*Figuring Your Underpayment (Part IV, Section A)*
on this page), they determined that they had an underpayment for all four
payment periods. See their completed Section A in
Figure 4-B
*(Continued)* on page 58.

Their $1,584 withholding (WH) is considered paid in four equal
installments of $396, one on each payment due date. Therefore, they must make
estimated tax payments (EST) of $1,288 ($1,684 required installment - $396 WH)
each period. However, they made only two estimated tax payments—$950 on
September 15, 2010, and $950 on January 15, 2011. They plan to file their return
and pay their balance due on April 18, 2011. Ben and Sally are considered to
have made the following payments for tax year 2010.

Payment Amount | Payment Date |

$396 WH | 4/15/10 |

$396 WH | 6/15/10 |

$396 WH | 9/15/10 |

$950 EST | 9/15/10 |

$396 WH | 1/15/11 |

$950 EST | 1/15/11 |

When completing line 1b of the worksheet combine all payments
made on the same date to reduce your computations. |

Ben entered the underpayment amount from line 25 of Form 2210
on line 1a of their Penalty Worksheet for each column. On line 1b, column (a) he
entered "6/15/10 – 396" and "9/15 – 892." Their combined payment for
9/15/10 was $1,346 ($396 WH + $950 EST). They used $892 of the 9/15 payment to
fully pay the underpayment on line 1a, column (a). He entered "9/15/10 –
454" (the remainder of their September payment) and "1/15/11 – 1,230" from
January to fully pay the underpayment in column (b). Ben entered their remaining
payment "1/15/11 – 116" on line 1b in column (c).

taxmap/pubs/p505-024.htm#en_us_publink1000249017## Figuring the penalty.(p51) |

If an underpayment was paid in two or more payments on different dates, you must
figure the penalty separately for each payment. On line 3 of the Penalty
Worksheet enter the number of days between the due date (line 2) and the date of
each payment on line 1b. On line 4 figure the penalty for the amount of each
payment applied on line 1b or the amount remaining unpaid. If no payments are
applied, figure the penalty on the amount on line 1a.

taxmap/pubs/p505-024.htm#en_us_publink1000207532Aid for counting days.(p51) |

Table 4-1
(see page 53) provides a simple method for counting the number of days between a
due date and a payment date.

For example, if a payment was due on June 15 (61), but was not
paid until September 1 (139), the payment was 78 (139 – 61) days late.

taxmap/pubs/p505-024.htm#en_us_publink1000207533taxmap/pubs/p505-024.htm#en_us_publink1000207540## Example 2.(p52) |

Continuing from the previous example for Ben and Sally Brown
(see
*Example 1* under
*Line 1b*
on page 51), they figure their penalty. First, they complete lines 3 and 4 for
Rate Period 1, which runs from April 16, 2010, to December 31, 2010.

taxmap/pubs/p505-024.htm#en_us_publink1000207543Penalty for first payment period (April 15, 2010)—column
(a).(p52) |

Line 1b of their Penalty Worksheet shows "6/15/2010 – 396" and

"9/15/10 – 892." $396 remained unpaid 61 days (April 16 through June 15, 2010) and $892 remained unpaid 153 days (April 16 through September 15, 2010). On line 3, column (a), they enter "61" and "153," along with the date of each payment.

"9/15/10 – 892." $396 remained unpaid 61 days (April 16 through June 15, 2010) and $892 remained unpaid 153 days (April 16 through September 15, 2010). On line 3, column (a), they enter "61" and "153," along with the date of each payment.

Next, on line 4, they figure the penalty separately for each
underpayment amount, $2.65 ($396 × (61 ÷ 365) × .04) and $14.96
($892 × (153 ÷ 365) × .04). See their completed Penalty Worksheet
on page 59.

taxmap/pubs/p505-024.htm#en_us_publink1000207544Penalty for second payment period (June 15, 2010)—column
(b).(p52) |

Line 1b for column (b) shows "9/15/10 – 454" and "1/15/11 – 1,230."
$454 remained unpaid until September 15 (92 days). The remaining underpayment of
$1,230 was paid January 15. The number of days from June 15 until the end of
Rate Period 1 (December 31) is 199. They enter "92" and "199" on line 3, column
(b), and figure the penalty separately for each underpayment amount. The
remaining 15 days that the $1,230 remained unpaid are part of Rate Period 2 and
are entered on line 6, column (b).

taxmap/pubs/p505-024.htm#en_us_publink1000207545Penalty for third payment period (September 15, 2010)—column
(c).(p52) |

The $1,684 underpayment on line 1a, column (c), remained fully underpaid until
the remaining $116 of the January 15 payment was applied. As in the second
payment period, Rate Period 1 ends December 31 (107 days). The remaining 15 days
for the $116 payment are entered under Rate Period 2.

There were no remaining payments to apply. The balance of $1,568
($1,684 – $116) remained unpaid until 4/15/11 (107 days in Rate Period 1
and 105 days in Rate Period 2) (**Note.**
The Browns actually filed and paid their balance due on 4/18/11, but because
that is the next business day after the holiday on 4/15/11, the payment is
considered to be paid on April 15.) They enter "107" and "107" on line 3, column
(c), and "15" and "105" on line 6, column (c). They figure the penalty
separately for each underpayment amount on lines 4 and 7.

taxmap/pubs/p505-024.htm#en_us_publink1000207546Penalty for fourth payment period (January 15, 2011)—column
(d).(p52) |

Since all payments have been applied, the entire amount remained
unpaid 90 days (January 16 through April 15, 2011). They enter that number on
line 6, column (d), and figure the penalty for the $1,684 underpayment, entering
it on line 7, column (d).

taxmap/pubs/p505-024.htm#en_us_publink1000207547Total penalty.(p52) |

Ben and Sally's total penalty for 2010 on line 8 is $96.41, the
total of all amounts on lines 4 and 7 in all columns. See their completed
Penalty Worksheet on page 59.

Ben and Sally enter that amount on Form 2210, line 27, and on
line 77 of their Form 1040. They also add $96.41 to their $4,000 tax balance and
enter the $4,096.41 total on line 76. They file their return on April 18 and
include a check for $4,096.41. They keep their completed Form 2210 for their
records.

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