Form Rev-1630a As - Underpayment Of Estimated Tax By Individual Farmers - 2013 Page 3
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Example 2. Same facts as Example 1 except the estimated payment
Example 5. Same facts as Example 1 except the return was filed on
made on Jan. 15, 2014, was $1,720 and that Warren and Michelle filed
May 15, 2014, and an extension was filed timely with a payment of
their tax return on March 15, 2014, along with a payment of $429.
$2,000. Warren and Michelle are subject to the estimated underpay-
Warren and Michelle are not subject to the estimated underpayment
ment interest penalty in this situation because they did not make all
penalty even though they filed their return and paid the balance due
their estimated payments by Jan. 15, 2014, did not file their return by
after March 3, 2014, because they paid 100 percent of their 2012 tax
March 3, 2014, and did not meet the EXCEPTION TO INTEREST in PART
liability by Jan. 15, 2014, and meet the EXCEPTION TO INTEREST in
II. The penalty is calculated on an underpayment of $719 (tax liability
PART II. Warren and Michelle paid $3,870 ($2,150 of withholding and
of $4,299 times 90 percent, less tax withheld of $2,150, and timely
estimated payments made of $1,000) times the number of days late
$1,720 in estimated payments) by Jan. 15, 2014.
(90) times the daily interest rate (0.000082), which gives an under-
Example 3. Same facts as Example 2 except an estimated tax pay-
payment of estimated tax interest penalty of $5.31. Even though
ment of $1,000 was made late on Jan. 31, 2014, and the amount paid
Warren and Michelle have an overpayment of taxes and will receive a
with their return filed on March 15, 2014, was $1,149. Warren and
refund or carry-over credit of the overpaid taxes, they are still subject
Michelle are subject to the estimated underpayment interest penalty in
to the estimated underpayment interest penalty for not making the full
this situation because they did not make all their estimated payments
amount of their estimated tax payments by Jan. 15, 2014, filing and
by Jan. 15, 2014, and did not file their return by March 3, 2014. The
paying the amount due with a return filed by March 3, 2014, or mak-
penalty is calculated on the underpayment of $1,719 (as calculated on
ing their total tax payments and credits for 2013 in at least the same
Line 5 of PART I: tax liability of $4,299 times 90 percent less tax with-
amount of last year’s taxable income times this year’s tax rate.
held of $2,150), times the number of days the liability was unpaid. In
Example 6. Same facts as Example 5 except no payment was made
this case, there were two payments of the liability; the late payment
of the estimated tax on Jan. 31, 2014, of $1,000 and the payment of
with a timely filed extension. Warren and Michelle are subject to the
the liability with the return on March 15, 2014, of $1,149. Therefore,
estimated underpayment interest penalty in this situation because
the underpayment of estimated tax interest penalty is two calcula-
they did not make all their estimated payments by Jan. 15, 2014, did
tions and totals $4.80: $1,719 total underpayment times 16 days
not file their return by March 3, 2014, and did not meet the EXCEP-
late, times daily rate of 0.000082 = $2.26; $719 remaining under-
TION TO INTEREST in PART II. The penalty is calculated on an
payment (total underpayment of $1,719 less $1,000 late estimated
underpayment of $719 (tax liability of $4,299 times 90 percent, less
payment) times 44 days remaining underpayment not paid times daily
tax withheld of $2,150, and timely estimated payments made of
interest rate of 0.000082 = $2.54; $2.26 plus $2.54 = $4.80
$1,000) times the number of days late (90), times the daily interest
rate (0.000082), which gives an underpayment of estimated tax inter-
Example 4. Same facts as Example 1 except the return was filed on
est penalty of $5.31. Warren and Michelle will also be subject to a late
April 15, 2014. Warren and Michelle are subject to the estimated
payment penalty of 5 percent on the amount of underpaid taxes
underpayment interest penalty in this situation because they did not
($1,149), or $57.45. Interest also accrues on the late payment at a
make all their estimated payments by Jan. 15, 2014, did not file their
rate of $0.09 per day for each day the taxes are unpaid in 2014.
return by March 3, 2014, and did not meet the EXCEPTION TO INTER-
EST in PART II. The penalty is calculated on an underpayment of $719
Example 7. Same facts as Example 1 except Warren’s gross income
(tax liability of $4,299 times 90 percent less tax withheld of $2,150
from farming was $325,000. Warren and Michelle do not qualify as
and timely estimated payments made of $1,000) times the number of
farmers and must complete Form REV-1630, Underpayment of
days late (90) times the daily interest rate (0.000082), which gives an
Estimated Tax by Individuals, to calculate their underpayment of esti-
underpayment of estimated tax interest penalty of $5.31.
mated tax interest penalty.
(Form on Page 4.)
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