Instructions For Form 2220 - Underpayment Of Estimated Tax By Corporations

3. If the box on line 8 and the box on line 6 and/or line 7

Net gain or loss from the disposition of 25% or more of the

are checked, follow the instructions in items 1 and 2 above

fair market value of the corporation's business assets during

by substituting Schedule A, line 35 for line 10 and complete

the tax year.

the rest of Schedule A, Part III.

These extraordinary items must be accounted for, in the

appropriate annualization period. However, a net operating

Line 11. Enter the estimated tax payments made by the

loss deduction and a section 481(a) adjustment (unless the

corporation for its tax year as indicated below. Include any

corporation makes the alternative choice under Regulations

overpayment from the corporation's 2015 tax return that was

section 1.6655-2(f)(3)(ii)(C)) are treated as extraordinary

credited to the corporation's 2016 estimated tax. If an

items occurring on the first day of the tax year in which the

installment is due on a Saturday, Sunday, or legal holiday,

item is taken into account in determining taxable income.

payments made on the next day that is not a Saturday,

De minimis rule. Extraordinary items identified above

Sunday, or legal holiday are considered made on the due

that are less than $1,000,000 (other than a net operating loss

date to the extent the payment is applied against that

carryover or a section 481(a) adjustment) may be annualized

required installment. If multiple columns have the same due

using the general rules of Regulations section 1.6655-2(f), or,

date, see the instructions for line 9.

if the corporation chooses, may be taken into account after

Column (a). Enter payments made by the date on line 9,

annualizing the taxable income for the annualization period.

column (a).

In Schedule A, Part II, make the appropriate adjustments

Columns (b), (c), and (d). Enter payments made by the

to annualized taxable income before figuring the estimated

date on line 9 for that column and after the date on line 9 of

tax for each reporting period. Similar adjustments must be

the preceding column.

made, if applicable, to Part I of Schedule A, if the adjusted

Line 17. If any of the columns in line 17 shows an

seasonal installment method applies. See the instructions for

underpayment, complete Part IV to figure the penalty.

Schedule A, lines 2, 9b, 21, and 23b, below.

Part IV. Figuring the Penalty

For more information regarding extraordinary items, see

Regulations section 1.6655-2(f)(3)(ii) and the examples in

Complete lines 19 through 38 to determine the amount of the

Regulations section 1.6655-2(f)(3)(vii).

penalty. The penalty is figured for the period of

underpayment using the underpayment rate determined

Part I. Adjusted Seasonal Installment Method

under section 6621. The period of underpayment generally

The corporation can use the adjusted seasonal installment

runs from the installment due date to the earlier of the date

method only if the corporation's base period percentage for

the underpayment is actually paid or the 15th day of the 4th

any 6 consecutive months of the tax year is 70% or more.

month after the close of the tax year. C corporations with tax

The base period percentage for any period of 6 consecutive

years ending June 30 and S corporations use the 3rd month

months is the average of the 3 percentages figured by

instead of the 4th month. Form 990-PF and 990-T filers use

dividing the taxable income for the corresponding

the 5th month instead of the 4th month.

6-consecutive-month period in each of the 3 preceding tax

Note. A corporation with a short tax year ending anytime in

years by the total taxable income for each of the 3 preceding

June will be treated as if the short tax year ended on June 30.

tax years, respectively. Figure the base period percentage

using the 6-month period in which the corporation normally

A payment of estimated tax is applied against unpaid

receives the largest part of its taxable income.

required installments in the order in which installments are

required to be paid, regardless of the installment to which the

Example. An amusement park with a 2016 calendar tax

payment pertains.

year receives the largest part of its taxable income during the

6-month period from May through October. To compute its

Example. A corporation with a calendar tax year

base period percentage for this 6-month period in 2016, the

underpaid the April 15 installment by $1,000. The June 15

amusement park figures its taxable income for each May–

installment requires a payment of $2,500. On June 10, the

October period in 2013, 2014, and 2015. It then divides the

corporation deposits $2,500 to cover the June 15 installment.

taxable income for each May–October period by the total

However, $1,000 of this payment is applied against the April

taxable income for that particular tax year. The resulting

15 installment. The penalty for the April 15 installment is

percentages are: 69% (.69) for May–October 2013, 74%

figured from April 15 to June 10 (56 days). The remaining

(.74) for May–October 2014, and 67% (.67) for May–October

$1,500 is applied to the June 15 installment.

2015. Because the average of 69%, 74%, and 67% is 70%,

If the corporation has made more than one payment for a

the base period percentage for May–October 2016 is 70%.

required installment, attach a separate computation for each

Therefore, the amusement park qualifies for the adjusted

payment.

seasonal installment method.

Schedule A

Line 2. If the corporation has certain extraordinary items,

special rules apply. Do not include on line 2 the de minimis

Extraordinary items. Generally, under the annualized

items that the corporation chooses to include on line 9b. See

income installment method, extraordinary items must be

Extraordinary items, earlier.

taken into account after annualizing the taxable income for

the annualization period. Similar rules apply in determining

Line 9b. If the corporation has extraordinary items of

taxable income under the adjusted seasonal installment

$1,000,000 or more, a net operating loss deduction, or a

method. An extraordinary item includes:

section 481(a) adjustment, special rules apply. Include these

Any item identified in Regulations section

amounts on line 9b for the appropriate period. Also include

1.1502-76(b)(2)(ii)(C)(1), (2), (3), (4), (7), and (8);

on line 9b the de minimis items that the corporation chooses

A net operating loss carryover;

to exclude from line 2. See Extraordinary items, earlier.

A section 481(a) adjustment; and

-3-

Instructions for Form 2220 (2016)

Instructions For Form 2220 - Underpayment Of Estimated Tax By Corporations - 2016 Page 3

Related Articles

Related forms

Related Categories