Ia 2220 Underpayment Of Estimated Tax 45-006 Page 2
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22015 IA 2220 Instructions
Purpose of Form
institution made an estimated tax payment of at least
Form IA 2220 will enable corporations and financial
100% of the amount it would owe if its estimated tax
institutions to determine if they paid the correct
were a tax computed on annualized taxable income for
amount of estimated tax by the proper due date. If the
the months preceding an installment date.
minimum
amount
was
not
paid
timely,
an
A corporation or financial institution may thus annualize
underpayment penalty is imposed for the period of the
its income:
underpayment. This form helps you to determine
1.
For the first 3 months if the installment was
whether or not you are subject to such a penalty.
required to be paid in the 4th month;
Estimated Tax
2.
For the first 3 months or the first 5 months if the
Every corporation or financial institution with $1,000 or
installment was required to be paid in the 6th
more in tax due after credits is required to file
month;
estimated tax.
3.
For the first 6 months or the first 8 months if the
installment was required to be paid in the 9th
Exceptions that Avoid the Underpayment Penalty
month; and
No penalty will be charged for any underpayment on
4.
For the first 9 months or for the first 11 months if
line 8 if:
the installment was required to be paid in the 12th
1.
All of the payments were made on or before the
month.
due date of the installment; and
2.
The total payments made by that installment date
To annualize, multiply taxable income for the period by
equal or exceed the amount which would have
12 and divide the resulting amount by the number of
been due if the estimated tax were calculated
months in the period (3, 5, 6, 8, 9, or 11, as the case
using any of the exceptions listed below.
may be). Enclose corporation income statements for
appropriate months in the tax period.
A different
exception
may be
applied
to
each
underpayment. If there has been an underpayment of
Overpayment
the amount of the estimated tax, and the taxpayer
A payment of estimated tax on any installment date is
believes that one or more of the exceptions to the
considered a payment of any previous underpayment
penalty precludes the assertion of the underpayment
only to the extent the payment exceeds the amount of
penalty, the taxpayer should complete lines 9 through
the installment as computed on line 5.
12 showing the applicability of any exception upon
Date of payment (line 15): Once a payment is made to
which the taxpayer relies. If no exception applies,
cover an exception to the penalty, the underpayment is
complete lines 13 through 19 to determine the amount
no longer outstanding, so the penalty computation
of the penalty on the underpayment from line 8.
stops at the date that payment is made.
Line 10: Exception 1 - Prior year’s tax
To Compute Penalty
This
exception
allows
corporations
and financial
Use the following formula:
institutions to substitute for the current year’s estimate
the amount of the tax shown on the return for the
daily %
number of
Penalty
=
x
x Underpayment
preceding taxable year. This exception may be utilized
rate
days
only if the preceding taxable year was a taxable year of
(line 17)
(line 16)
(line 14)
12 months and a return showing a tax liability (including
a “zero” liability) was filed for that year. Corporations or
The daily percentage rate is:
financial institutions filing an initial year Iowa return may
5% per annum = 0.013699% per day (1/1/15 - 12/31/15)
not use Exception 1.
Line 11: Exception 2 - Tax on prior year’s
5% per annum = 0.013661% per day (1/1/16 - 12/31/16)
income using current year’s rates
Please enclose this form with your corporation
This
exception allows
corporations
and financial
income tax return, form IA 1120 or form IA 1120F.
institutions to use a tax computed by using the current
year’s rates but otherwise on the basis of the facts and
Questions:
law applicable to the prior year. Corporations and
Call 515-281-3114 or 800-367-3388
financial institutions filing an initial year Iowa return
Additional information can be found on the Department
may not use Exception 2.
website (https://tax.iowa.gov/).
Line 12: Exception 3 - Tax on Annualized Income
Email: idr@iowa.gov
This section applies if the corporation or financial
45-006b (10/08/15)
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