Instructions For Form D-20 Or D-30 - Underpayment Of Estimated Tax

Instructions for Underpayment of Estimated Tax by D-20 or D-30 Filers

Estimated Tax Penalty

Ofﬁ ce of Tax and Revenue

941 N Capitol St NE 6th Floor

What is the DC law regarding payment of Estimated Tax by

Washington DC 20002-4265

franchise tax businesses?

Attn: Estimated Tax Penalty Adjustment

DC law requires any business that expects its DC franchise tax

liability to exceed $1000 for the tax year to ﬁ le a declaration of

Completing this form

estimated franchise tax using the payment vouchers in:

• D-20ES – Declaration of Estimated Franchise Tax for

Line 1

Corporations; or

Enter the amount from your 2006 D-20 or D-30 (Line 37)

• D-30ES – Declaration of Estimated Franchise Tax for

Line 2

Unincorporated Businesses.

Multiply the amount on Line 1 by 90% (.90). Your estimated tax

The law states that anyone required to ﬁ le and pay estimated tax

payments must be equal to or greater than this amount.

who fails to pay the amount required by the due date is subject to

Line 3

an underpayment of estimated income tax penalty and interest.

Enter the amount from your 2005 DC Forms D-20 or D-30, Line

37. If your 2005 return was amended or corrected, be sure to

When is a penalty for Underpayment of Estimated Franchise

show the corrected amount.

Tax assessed?

Line 4

A 10% penalty, compounded daily, is assessed if your total DC

Enter the lesser of Line 2 or Line 3. If you did not ﬁ le a DC tax

estimated income tax payments compared to your DC franchise tax

return for 2005, you may use only Line 2. This is your minimum

do not equal at least the smaller of:

estimated tax payment amount for 2006.

• 90% of the tax due (Line 37) on your 2006 return, or

Line 5

• 100% of the tax due (Line 37) on your 2005 DC tax return.

Multiply the amount on Line 4 by 25% (.25). This gives you

You must have ﬁ led a 2005 DC tax return to use this exception.

an even distribution of your liability over the four quarters of

the tax year.

You will also be assessed a penalty if any statement made on an

Line 6

estimated tax payment voucher is not true and accurate to the best

Enter the amount from Line 5 under each of the columns for

of the signatory’s knowledge.

installments. For example, If Line 5 is $2,000, you would enter

Are there any exceptions?

$2000 for the 1

period, $4000 for the 2

Period, $6,000 for

You are not subject to the penalty for underpayment of estimated

the 3

Period and $8,000 for the 4

Period.

Annualized income method: If your income was different for

tax if:

• You had no DC franchise tax liability for the tax year 2005

each period, determine the percentage for each period (divide

and in that year, you did business in DC the entire 12 months,

the period amount by full year’s income). Multiply Line 4 by

• The tax due for 2006, minus any estimated tax payments, is

each period’s percentage and enter the amounts earned by period

less than $1000,

on Line 6. Accumulate the period amounts as shown above.

• Your total DC estimated tax payments equal or are greater than

Check the “Annualized Income” box.

Line 7

your 2005 DC franchise tax liability, or

• The total due on your DC return (Line 40) is not more than 10%

Enter the amount of estimated payments made in each period.

of your 2006 DC tax (Line 37); and your estimated tax payments

Include the amounts from the previous period with the 2

, 3

were paid on time.

and 4

periods. For example, If your estimated payment amount

is $1,000 in each period, you would enter $1,000 in the 1

Period, $2,000 in the 2

Period, $3000 in the 3

Period and

$4000 in the 4

Period.

Who needs to ﬁ le the Underpayment of

Line 8 Underpayment each period

Estimated Franchise Tax form?

For each column, subtract Line 7 from Line 6. If Line 7 exceeds

Line 6, you have no penalty. If there is an amount remaining,

• You can use this form to calculate your penalty. If you do, attach

this is your quarterly underpayment amount.

it to your tax return and add the penalty and any interest you

Line 9 Penalty Factors

calculate to the amount on Line 40 of Forms D-20 or D-30. If

These are the penalty factors by period. They are the penalty

you do not wish to calculate the penalty and interest, we will do

percentage based on the number of days between periods.

it when your return is processed and will notify you of the amount

Line 10

due.

For each column, multiply the amount on Line 8 by the factor

• You may also complete this form if you believe the penalty

on Line 9. This is your penalty by period.

amount assessed for Underpayment of Estimated Franchise Tax is

Line 11 Penalty

incorrect. NOTE: Use the annualized income installment method

Add the amounts from each column on Line 10. This is your

if your income was earned disproportionately later in the year.

total Underpayment of Estimated Tax Penalty.

Where do you send this form?

• If you are ﬁ ling this with your form, include it in the amount

you owe and pay the total amount with the return.

Attach it to your return If you complete it before ﬁ ling your tax return.

• If you are ﬁ ling this form separately, pay the amount you owe.

If you complete it after receiving notice of a penalty assessment,

Make the check or money order out to the DC Treasurer.

send it to:

Revised 12-2006

D-2220 page 2

Instructions For Form D-20 Or D-30 - Underpayment Of Estimated Tax - 2006

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