Looking for a Pennsylvania Tax Forms And Templates? Download it for free!

times 0.000110 times the number of days after the date of the

estimated payment) times 43 days remaining underpayment not paid

additional payment to and including the earlier of the date of

times daily interest rate of 0.000110 = $3.40; $2.65 plus $3.40 = $6.05.

the additional payment or April 18, 2017. Include a worksheet

Example 4. Same facts as Example 1 except the return was filed on

showing any additional calculations. See the following examples for

April 18, 2017. Warren and Michelle are subject to the estimated

additional information.

underpayment interest penalty in this situation because they did not

make all their estimated payments by Jan. 17, 2017, did not file

EXAMPLES

their return by March 1, 2017, and did not meet the EXCEPTION TO

Example 1. Warren has total gross income from all sources of

INTEREST in PART II. The penalty is calculated on an underpayment of

$500,033, and gross income from farming is $400,000 in 2016.

$719 (tax liability of $4,299 times 90 percent less tax withheld of

Warren’s wife, Michelle, has wages subject to withholding of $70,033,

$2,150 and timely estimated payments made of $1,000) times the

from which $2,150 of Pennsylvania income tax was withheld. They have

number of days late (91) times the daily interest rate (0.000110),

joint interest and dividend income of $30,000 in addition to Warren’s

which gives an underpayment of estimated tax interest penalty of $7.20.

net income from farming of $40,000. Warren and Michelle made one

estimated payment of $1,000 on Jan. 17, 2017, and file their tax

Example 5. Same facts as Example 1 except the return was filed on

return on March 1, 2017, and include a payment of $1,149 with that

May 16, 2017, and an extension was filed timely with a payment of

return. Warren and Michelle had Line 11 Taxable Income of $126,059

$2,000. Warren and Michelle are subject to the estimated underpayment

from their 2015 PA-40. The 2015 taxable income times the 2016

interest penalty in this situation because they did not make all their

tax rate was $3,870. In 2015, Michelle had the same wages and

estimated payments by Jan. 17, 2017, did not file their return by

withholding as she has in 2016. If Warren and Michele were not eligible

March 1, 2017, and did not meet the EXCEPTION TO INTEREST in PART

to report as a farmer, total estimated tax payments of $1,720 would

II. The penalty is calculated on an underpayment of $719 (tax liability

have been required to be paid throughout 2016 to avoid the estimated

of $4,299 times 90 percent, less tax withheld of $2,150, and timely

underpayment penalty. Warren and Michelle will not be subject to the

estimated payments made of $1,000) times the number of days

estimated underpayment interest penalty since they qualify as a farmer

late (91) times the daily interest rate (0.000110), which gives an

with more than two-thirds of gross income coming from farming. They

underpayment of estimated tax interest penalty of $7.20. Even though

also either made estimated tax payments equaling their tax liability or

Warren and Michelle have an overpayment of taxes and will receive a

paid the remaining tax due with their return filed on or before March 1.

refund or carry-over credit of the overpaid taxes, they are still subject

Example 2. Same facts as Example 1 except the estimated payment

to the estimated underpayment interest penalty for not making the full

made on Jan. 17, 2017, was $1,720 and that Warren and Michelle filed

amount of their estimated tax payments by Jan. 17, 2017, filing and

their tax return on March 15, 2017, along with a payment of $429.

paying the amount due with a return filed by March 1, 2017, or making

Warren and Michelle are not subject to the estimated underpayment

their total tax payments and credits for 2016 in at least the same

penalty even though they filed their return and paid the balance due

amount of last year’s taxable income times this year’s tax rate.

after March 1, 2017, because they paid 100 percent of their 2014 tax

Example 6. Same facts as Example 5 except no payment was made

liability by Jan. 17, 2017, and meet the EXCEPTION TO INTEREST in

with a timely filed extension. Warren and Michelle are subject to the

PART II. Warren and Michelle paid $3,870 ($2,150 of withholding and

estimated underpayment interest penalty in this situation because

$1,720 in estimated payments) by Jan. 17, 2017.

they did not make all their estimated payments by Jan. 17, 2017,

Example 3. Same facts as Example 2 except an estimated tax payment

did not file their return by March 1, 2017, and did not meet the

of $1,000 was made late on Jan. 31, 2017, and the amount paid with

EXCEPTION TO INTEREST in PART II. The penalty is calculated on an

their return filed on March 15, 2017, was $1,149. Warren and Michelle

underpayment of $719 (tax liability of $4,299 times 90 percent, less

are subject to the estimated underpayment interest penalty in this

tax withheld of $2,150, and timely estimated payments made of

situation because they did not make all their estimated payments by

$1,000) times the number of days late (91), times the daily interest

Jan. 17, 2017, and did not file their return by March 1, 2017. The

rate (0.000110), which gives an underpayment of estimated tax

penalty is calculated on the underpayment of $1,719 (as calculated

interest penalty of $7.20. Warren and Michelle will also be subject to

on Line 5 of PART I: tax liability of $4,299 times 90 percent less tax

a late payment penalty of 5 percent on the amount of underpaid taxes

withheld of $2,150), times the number of days the liability was

($1,149), or $57.45. Interest also accrues on the late payment at a

unpaid. In this case, there were two payments of the liability; the late

rate of $0.13 per day for each day the taxes are unpaid in 2017.

payment of the estimated tax on Jan. 31, 2017, of $1,000 and the

Example 7. Same facts as Example 1 except Warren’s gross income

payment of the liability with the return on March 15, 2017, of $1,149.

from farming was $325,000. Warren and Michelle do not qualify

Therefore, the underpayment of estimated tax interest penalty is two

as farmers and must complete Form REV-1630, Underpayment

calculations and totals $6.05: $1,719 total underpayment times 14

days late, times daily rate of 0.000110 = $2.65; $719 remaining

of Estimated Tax by Individuals, to calculate their underpayment of

underpayment (total underpayment of $1,719 less $1,000 late

estimated tax interest penalty.

(Form on Page 4.)

GO DIRECTLY TO FORM

Instructions For Form Rev-1630-A (Ex) - Underpayment Of Estimated Tax By Individual Farmers - 2016 Page 3

Related Articles

Related forms

Related Categories