Publication 505
taxmap/pubs/p505-020.htm#en_us_publink1000207472You should consider the items in this section when figuring any underpayment penalty for 2011.
taxmap/pubs/p505-020.htm#en_us_publink1000207682Temporary decrease in employee's share of payroll Tax.
(p57)Social security tax is withheld from an employee's wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. There is no change to Medicare
withholding.
The same reduction applies to the net earnings from self-employment—the temporary rate will be 10.4% (down from 12.4%) up to the social security wage limit of
$106,800.
Advance earned income credit.
(p57)The advance earned income credit (EIC) was eliminated. If you are a household employer and made advance EIC payments, you do not include those payments as estimated tax
payments.
If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty.
 | You may understand this chapter better if you can refer to copies of your latest federal income tax
returns. |
taxmap/pubs/p505-020.htm#en_us_publink1000207478Generally, you will not have to pay a penalty for 2011 if any of the following apply.
- The total of your withholding and timely estimated tax payments was at least as much as your 2010 tax. (See
Special rules for certain individuals for higher income taxpayers and farmers and fishermen.)
- The tax balance due on your 2011 return is no more than 10% of your total 2011 tax, and you paid all required estimated tax payments on time.
- Your
Total tax for 2011 (defined later) minus your withholding is less than $1,000.
- You did not have a tax liability for 2010.
- You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000.
If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Generally, the IRS will figure the penalty for you and send you a bill.
You only need to figure your penalty in the following three situations.
- You are requesting a waiver of part, but not all, of the penalty.
- You are using the annualized income installment method to figure the
penalty.
- You are treating the federal income tax withheld from your income as paid on the dates actually
withheld.
However, if these situations do not apply to you, and you think you can lower or
eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your
return. See
Form 2210, later.
Useful items
You may want to see:
Form (and Instructions) 2210:
Underpayment of Estimated Tax by Individuals, Estates, and Trusts
2210-F:
Underpayment of Estimated Tax by Farmers and Fishermen
See
chapter 5 for information about getting these forms.
In general, you may owe a penalty for 2011 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of:
- 90% of your 2011 tax, or
- 100% of your 2010 tax. (Your 2010 tax return must cover a 12-month
period.)
Your 2011 tax, for this purpose, is defined under
Total tax for 2011, later.
There are special rules for farmers and fishermen and certain higher income taxpayers.
taxmap/pubs/p505-020.htm#en_us_publink1000207482If at least two-thirds of your gross income for 2010 or 2011 is from farming or fishing, substitute
662/3% for 90% in (1) above.
taxmap/pubs/p505-020.htm#en_us_publink1000207483If your AGI for 2010 was more than $150,000 ($75,000 if your 2011 filing status is married filing a separate return), substitute 110% for 100% in (2) under
General Rule. This rule does not apply to farmers or fishermen.
For 2010, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.
taxmap/pubs/p505-020.htm#en_us_publink1000207484Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. This is true even if you are due a refund when you file your income tax return.
taxmap/pubs/p505-020.htm#en_us_publink1000207485You did not make estimated tax payments for 2011 because you thought you had enough tax withheld from your wages. Early in January 2012, you made an estimate of your total 2011 tax. Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated
tax.
On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Your final return shows your total tax to be $50 less than your estimate, so you are due a
refund.
You do not owe a penalty for your payment due January 15, 2012. However, you may owe a penalty through January 10, 2012, the day you made the $3,000 payment, for your underpayments for the earlier payment
periods.
taxmap/pubs/p505-020.htm#en_us_publink1000207486You will owe a penalty for any 2011 payment period for which your estimated tax payment plus your withholding for the period and overpayments for previous periods was less than the smaller of:
- 22.5% of your 2011 tax, or
- 25% of your 2010 tax. (Your 2010 tax return must cover a 12-month
period.)
If you are subject to the rule for higher income taxpayers, discussed above, substitute 27.5% for 25% in (2) under
General Rule.
If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. If a payment is mailed, the date of the U.S. postmark is considered the date of payment.
taxmap/pubs/p505-020.htm#en_us_publink1000207488If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041), box 13, code A), treat the payment as made by you on January 15, 2012.
taxmap/pubs/p505-020.htm#en_us_publink1000207490If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. If you file an amended return after the due date of the original return, use the tax shown on the original return.
However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. This rule applies only if both original separate returns were filed on time.
taxmap/pubs/p505-020.htm#en_us_publink1000207491If you file a joint return with your spouse for 2011, but you filed separate returns for 2010, your 2010 tax is the total of the tax shown on your separate returns. You filed a separate return if you filed as single, head of household, or married filing separately.
taxmap/pubs/p505-020.htm#en_us_publink1000207492If you file a separate return for 2011, but you filed a joint return with your spouse for 2010, your 2010 tax is your share of the tax on the joint return. You are filing a separate return if you file as single, head of household, or married filing separately.
To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2010 using the same filing status as for 2011. Then multiply the tax on the joint return by the following fraction.
| | The tax you would have paid had you filed a separate return | |
| The total tax you and your spouse would have paid had you filed separate
returns |
Lisa and Paul filed a joint return for 2010 showing taxable income of $49,000 and a tax of $6,516. Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. For 2011, they file married filing separately. Lisa figures her share of the tax on the 2010 joint return as follows.
| 2010 tax on $41,000 based on a separate return
| $ 6,438 |
2010 tax on $8,000 based on a
separate return
| 803
|
| Total
| $ 7,241 |
Lisa's percentage of total tax
($6,438 ÷ $ 7,241)
| 88.91%
|
Lisa's part of tax on joint return
($6,516 × 88.91%)
| $ 5,793 |
In most cases, you do not need to file Form 2210. The IRS will figure the penalty for you and send you a bill. If you want us to figure the penalty for you, leave the penalty line on your return blank. Do not file Form
2210.
To determine if you should file Form 2210, see Part II of Form 2210. If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. If you use Form 2210, you cannot file Form
1040EZ.
On Form 1040, enter the amount of your penalty on line 77. If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. If you are due a refund, subtract the penalty from the overpayment and enter the result on line
73.
On Form 1040A, enter the amount of your penalty on line 46. If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. If you are due a refund, subtract the penalty from the overpayment and enter the result on line
42.
taxmap/pubs/p505-020.htm#en_us_publink1000207497You may be able to lower or eliminate your penalty if you file Form 2210. You must file Form 2210 with your return if any of the following applies.
- You request a waiver. See
Waiver of Penalty, later.
- You use the annualized income installment method. See the explanation of this method under
Annualized Income Installment Method (Schedule AI).
- You use your actual withholding for each payment period for estimated tax purposes. See
Actual withholding method under
Figuring Your Underpayment (Part IV, Section A)
.
- You base any of your required installments on the tax shown on your 2010 return and you filed or are filing a joint return for either 2010 or 2011, but not for both
years.
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