Form Cd-429b - Underpaiment Of Estimated Tax By C Coporations

Form CD–429B(Reverse)

(Rev. 10–00)

INSTRUCTIONS

PURPOSE OF FORM

Form CD–429B is used by corporations to determine whether they paid enough estimated tax, whether they are subject to the penalty

under G. S. 105–163.41 for underpayment of estimated tax and, if so, the amount of penalty. Estimated tax is a corporation’s expected

income tax liability minus its credits. A corporation must make estimated tax payments if it can reasonably expect its income tax to be $500

or more.

HOW TO USE THIS FORM

Complete Part 1 of Form CD–429B to find if there is an underpayment for any of the four payment periods. If there is an underpayment

on line 6 (column a, b, c, or d), go to Part II, Exceptions to the Penalty. If none of the exceptions apply, go to Part III, Computation of

Underpayment Penalty. If you are using Form CD–429B either to figure the estimated tax penalty or to show that you qualify for any

exception, attach Form CD–429B to your income tax return.

PART I. COMPUTATION OF UNDERPAYMENT

Enter the tax liability on line 1 from page 1, income tax computation, of the return for the particular taxable period covered. The percentage

of the total tax liability which is payable as estimated tax is ninety percent (90%).

Line 4(b) – Enter any overpayment shown on line 6 that is more than the total of all underpayments.

Line 6

– If line 6 shows an underpayment, complete Part II to see if any of the exceptions apply.

PART II. EXCEPTIONS TO THE UNDERPAYMENT PENALTY

You will not have to pay a penalty if all of your tax payments (Part II, line 7) were made on time and are equal to or more than any one

of the amounts figured as explained by the exceptions (lines 8, 9 and 10) for the same payment period (column a, b, c, or d).

The three exceptions to the penalty are:

* Line 8 – Exception 1, prior year’s tax.– – Generally, this exception applies if the corporation paid an amount equal to or more than the

tax shown on its prior year return. However, the corporation must have filed an income tax return for the preceding tax year and that year

must have consisted of 12 months.

* Line 9 – Exception 2, tax on prior year’s income using current year’s rates. – – Generally, this exception applies if the amount the

corporation paid is equal to or more than the tax figured by using the current year’s rates but based on the facts shown on the prior year’s

return and the law that applies to the prior year.

Line 10 – Exception 3, tax on annualized income. – – This exception applies if the estimated tax paid was equal to or more than 90%

of the amount the corportion would owe if its estimated tax were a tax figured on annualized taxable income for the months preceding an

installment date.

A corporation may annualize its income as follows:

(a) For the first 3 months if the installment was required to be paid in the 4th month.

(b) For the first 3 months or for the first 5 months if the installment was required to be paid in the 6th month.

(d) For the first 9 months or for the first 11 months if the installment was required to be paid in the 12th month.

To annualize, multiply taxable income for the period by 12 and divide the result by the number of months in the period (3, 5, 6, 8, 9, or

11, as the case may be).

Please attach your computation.

PART III.

COMPUTATION OF UNDERPAYMENT PENALTY

If no exception applies, complete lines 11 through 18 to determine the amount of the penalty. The penalty is figured for the period of

underpayment determined under G. S. 105–163.41(c) at a rate determined under G. S. 105–241.1(i). The rate is announced semiannually

by the Secretary of Revenue. Interest rate is 7% from 1–1–93 to 12–31–94; 8% from 1–1–95 to 6–30–95; 9% from 7–1–95 to 12–31–98;

8% from 1–1–99 to 12–31–00.

A payment of estimated tax is considered first a payment of any previous underpayment in the order of required installments without

regard to the installment the payment pertains to. For example, if the April 15 installment is underpaid by $1000 and the June 15 required

payment of $2500 is timely made, $1000 of the June payment will be considered for the April 15 installment with the underpayment penalty

determined for the period from April 16 through the date paid in June.

If more than one payment has been made for a required installment, attach separate computations for each.

*NOTE: Exceptions 1 and 2, lines 8 and 9, do not apply to ‘‘large” corporations. A ‘‘large” corporation is as defined under Internal Revenue

Code Section 6655.

Form Cd-429b - Underpaiment Of Estimated Tax By C Coporations - 2000 Page 2

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