Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, is used to determine whether you owe a penalty for not paying enough tax throughout the year.
The IRS follows a "pay-as-you-go" system. That means you're generally expected to pay taxes as income is earned, either through:
- Tax withholding from wages, pensions, or other income, or
- Quarterly estimated tax payments
If you don't pay enough tax during the year, you may owe an underpayment penalty, even if you receive a refund when you file your return.
Who Typically Pays Estimated Taxes?
Estimated taxes are commonly paid by taxpayers who earn income that isn't subject to withholding, including:
- Self-employed individuals
- Independent contractors
- Sole proprietors
- Partners in a partnership
- S corporation shareholders
- Individuals with significant investment, rental, or other untaxed income
Estimated tax payments are generally due four times each year:
- April 15
- June 15
- September 15
- January 15 of the following year
If a due date falls on a weekend or holiday, the payment deadline is typically moved to the next business day.
Do I Have to Make Estimated Tax Payments?
You're not automatically required to make estimated payments. However, the IRS generally expects you to pay estimated taxes if both of the following apply:
- You expect to owe at least $1,000 in tax for the current year after subtracting withholding and refundable credits.
- You expect your withholding and credits to be less than the smaller of:
- 90% of your current year's tax, or
- 100% of your prior year's tax (if your prior-year return covered a full 12 months).
Higher-Income Taxpayers
If your prior-year adjusted gross income (AGI) exceeded:
- $150,000 (most filing statuses), or
- $75,000 (Married Filing Separately),
you generally must use 110% of your prior-year tax liability instead of 100% when applying the safe harbor rule.
This higher-income rule does not apply to certain farmers and fishermen.
Will I Owe a Penalty if I Don't Pay Estimated Taxes?
Potentially, yes.
You may owe an underpayment penalty if the combined total of your withholding and timely estimated tax payments is less than the required amount under the IRS rules.
You may also owe a penalty if:
- An estimated payment was late, or
- You missed one or more quarterly payment deadlines
A common misconception is that catching up later eliminates the penalty. Unfortunately, penalties are calculated separately for each installment period. Even if you pay enough later in the year, you may still owe a penalty for an earlier missed payment.
This can happen even when you're due a refund at filing time.
Can the Penalty Be Reduced or Waived?
In some situations, yes.
The IRS may reduce or waive all or part of the penalty if your underpayment was due to circumstances beyond your control, such as:
- A serious illness or injury
- The death of a family member
- A casualty event or local disaster
- Other unusual situations where imposing the penalty would be unfair
You may also qualify for penalty relief if:
- You or your spouse (if filing jointly) retired after age 62 within the last two years, or
- You became disabled and had reasonable cause for the underpayment
If you're requesting a waiver, you'll generally need to provide a signed explanation supporting your request.
What If My Income Varied During the Year?
Many taxpayers don't earn income evenly throughout the year.
For example, you may have:
- Seasonal self-employment income
- Large investment gains late in the year
- A bonus or commission received during one quarter
- Rental income that fluctuates throughout the year
In these situations, you may be able to reduce or eliminate an underpayment penalty by using the Annualized Income Installment Method on Schedule AI of Form 2210.
This method allows your required estimated tax payments to be based on when income was actually earned rather than assuming it was earned evenly throughout the year.
How Does the Software Calculate Form 2210?
Our software can calculate the penalty for you, but you'll need to provide certain information, including:
- Your prior-year tax liability
- The dates and amounts of any estimated tax payments made during the current tax year
Once entered, the program will determine whether Form 2210 is required and calculate any applicable penalty automatically.
Not Sure Whether You Need Form 2210?
It's often best to complete the Form 2210 interview if you're unsure.
The software will:
- Determine whether you're subject to an underpayment penalty
- Calculate the penalty if one applies
- Include the result on your tax return automatically
Any penalty amount will generally be reflected on your Form 1040.
Where Do I Complete Form 2210 in the Program?
To access Form 2210, navigate to:
- Federal Section
- Payments and Estimates
- Underpayment of Estimated Tax (Form 2210)
The program will guide you through the information needed to determine whether a penalty applies.
Additional Information