Instructions For Underpayment Of Estimated Tax By Individuals Form 2008 (Page 2 of 2) in pdf

If Line 9 is zero for all payment periods, you do not owe interest

•

$3,239 (90 percent of the tax liability on the current return); or

penalty. If you have an underpayment on Line 9 in any payment

•

$3,502 (PA taxable income on prior year’s return multiplied by the

period, continue on to Part II, Exception 1 Worksheet.

current year’s tax rate).

NOTE: If there are columns with underpayments, you must complete

In this case, $1,344 is less than both safe harbors.

the rest of this form.

Since the current PA tax liability minus current withholding and credits

is at least $246 and since the current year withholding and allowable

PART II. CALCULATING YOUR EXCEPTIONS

credits are less than $3,239, the taxpayer should fill out Form REV-1630

Line 11. Enter the result of Exception 1 Worksheet, Line C.

to determine if there is an underpayment of estimated tax.

Line 12. Exception 1 applies if your 2008 estimated tax payments

and credits equal the tax that would have been due on your 2007

DETERMINING IF THERE IS AN UNDERPAYMENT AND HOW

income and if you used the current rate. It does not apply if you did

THE DEPARTMENT DETERMINES THE DECLARATION

not file a return for the prior year or if the prior year’s return was filed

A taxpayer makes an underpayment of quarterly estimated tax liability

as a part-year resident.

whenever he fails to declare and pay all or any part of the amount

declared as the quarterly estimated payment.

To calculate, multiply your Pennsylvania taxable income from your

2007 return by 3.07 percent (0.0307). Enter 25 percent of this

DETERMINING THE UNDERPAYMENT AMOUNT UPON WHICH

amount in Column a, 50 percent in Column b, 75 percent in Column c

THE ADDITION OF INTEREST MAY BE ASSESSED

and 100 percent in Column d. If the amount on Line 11 is equal to or

The amount to be considered is that the taxpayer should have paid

greater than the amount on Line 12 in any of the columns, you do not

in estimated taxes if the taxpayer could have used the PA Tax

owe interest for that payment period and you should place an X in the

Liability (Line 12) as shown on his PA-40 tax return.

applicable line 14a or 14b for that quarter. If the amount on Line 11

The underpayment is the difference between the tax liability times 90

is less than the amount on Line 12 for any payment period, continue

percent, minus any credits for the applicable payment period (cal-

on to Exception 2 for those periods.

culated by dividing 90 percent of Line 12 of Form PA-40 minus any

Line 13. Exception 2 applies if your 2008 estimated tax payments and

withholding and credits, by the number of estimated payment periods)

credits equal at least 90 percent of the tax on your actual taxable

and the estimated payments paid on time for that payment period.

income for the periods from Jan. 1 to March 31; Jan. 1 to May 31;

IMPORTANT: The amounts calculated in each of the columns on

Jan. 1 to August 31; and Jan. 1 to Dec. 31. Enter 90 percent of

Lines 12 and 13 for Exceptions 1 and 2 cannot be used to determine

Exception 2 Worksheet, Line B. If Line 11 is equal to or greater than

the underpayment penalty. You must use Line 9 in this calculation.

Line 13, the exception applies for that payment period and you

However, if you had no estimated tax payment requirements for a

should place an X in the applicable line 14a or 14b for that payment

previous tax year due to the tax liability being below the threshold

period.

required for estimated tax payments to be made, or because you

PART III. CALCULATING INTEREST

were eligible for 100 percent tax forgiveness, special exceptions

Use this part of the form to calculate the amount of the interest

apply and you may not owe penalties for the payment periods prior to

penalty due. If one of the exceptions applies for any of the periods,

meeting the estimated payment requirements.

place an X in the boxes under the column for that period. You only

Special exceptions only apply if a taxpayer files an original or amended

have to complete Lines 14 and 15 for the periods in which interest is

PA-40ESR(I), Declaration of Estimated or Estimated Withholding

due. The underpayment is the amount on Line 9 for the appropriate

Income, and makes the full estimated tax payment due in the first

payment period.

period in which it is determined the estimated payment requirements

Lines 14a, 14b and 14c.

were met for a year following a year in which no estimated payments

were due or required to be made.

Line 14a. Applies to first, second and third payment periods for

calendar year filers and any fiscal filer payments that were due on

If the PA-40ESR is not filed in the correct payment period, or if the

or before Dec. 31. If no estimated payments were made during the

full amount of the estimated tax payment is not made in that period,

year, use the number of days after the estimated payment due date

the special exception does not apply for any payment periods, and the

to and including the date of the annual payment or Dec. 31,

estimated underpayment penalty will apply for all payment periods in

whichever is earlier. If Dec. 31 is earlier, enter 260 in Column a, 198

which the estimated tax underpayment exists.

in Column b and 107 in Column c. Fiscal filers adjust according to

In situations where conditions exist for the exception to apply, complete

estimated payment due dates.

the Exception 2 worksheet to indicate the quarters in which the income

Line 14b. If no estimated payment was made for the fourth payment

(Line A) was earned and the tax liability (Line B) for those periods.

period, use the number of days after the estimated payment due

Place an X in the applicable box on Line 14a to indicate that you do not

date to and including date of annual payment or April 15, 2009,

owe a penalty for each payment period the special exception applies.

whichever is earlier. If April 15 is earlier, enter 90 in Column d.

You must also complete the “SPECIAL EXCEPTION INFORMATION”

Fiscal filers adjust according to due date of annual return.

section in PART III by entering the information requested for Lines A

14c. Applies to first, second and third payment periods for calendar

and B.

year filers and any fiscal filer payments that were due after Dec. 31.

BILLING THE ADDITION OF INTEREST

If no estimated payments were made, use the number of days after

The interest to be added to the taxpayer’s tax liability for an under-

Dec. 31, 2008 to and including date of annual payment or April 15,

payment is to be billed per quarter. The interest to be added is based

2009, whichever is earlier. If April 15 is earlier, enter 105 in each

upon the amount of the underpayment per payment period.

column. Fiscal filers adjust according to due date of annual return.

Interest is assessed upon the underpayment amount until the tax-

If a taxpayer fully pays an underpayment after a required due date

payer has made payments for the applicable payment period that

but prior to or on the next due date, then the number of days after

equal the amount of the declared estimated payment liability.

due date of estimated payment in Lines 14a, 14b or 14c must be

However, interest may not be imposed beyond the 15th day of the

adjusted. To make the adjustment, count the days from the due date

fourth month of the close of the taxpayer’s taxable year (typically

to the date of payment.

April 15th) for any quarter.

If the taxpayer partially pays an underpayment after a required due

If a taxpayer makes a late payment for a payment period in which an

date but prior to or on the next due date, that partial payment is

underpayment exists and his total payments for that period are less

considered a reduction, on the payment date, to the oldest payment

than the amount of the declared estimated tax liability or the required

period’s underpayment. For such situation, the taxpayer will need to

estimated amount, interest is billed upon the underpayment amount.

adjust this part accordingly.

However, as soon as a taxpayer makes a late payment for a payment

EXAMPLE OF WHEN ESTIMATED UNDERPAYMENT APPLIES:

period in which an underpayment exists, the underpayment is reduced

Tax liability for current tax year

$3,599

by the late payment amount even if the total payment amount is less

Less current tax year’s withholding and credits

1,344

than the amount of the taxpayer’s declared estimated tax liability.

$2,255

When the taxpayer has made payments for the underpayment period

Current withholding and credits must be less than the smaller of the

equal to his declared estimated tax liability, the Department does not

following to be penalized for estimated underpayment:

impose interest for that payment period.

Instructions For Underpayment Of Estimated Tax By Individuals Form 2008 Page 2

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