Form Rev-1630a - Underpayment Of Estimated Tax By Individual Farmers - 2014 Page 3
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tax liability or paid the remaining tax due with their return filed on or
Example 5. Same facts as Example 1 except the return was filed on
before March 2.
May 15, 2015, and an extension was filed timely with a payment of
$2,000. Warren and Michelle are subject to the estimated underpay-
Example 2. Same facts as Example 1 except the estimated payment
ment interest penalty in this situation because they did not make all
made on Jan. 15, 2015, was $1,720 and that Warren and Michelle filed
their estimated payments by Jan. 15, 2015, did not file their return by
their tax return on March 16, 2015, along with a payment of $429.
Warren and Michelle are not subject to the estimated underpayment
March 2, 2015, and did not meet the EXCEPTION TO INTEREST in PART
penalty even though they filed their return and paid the balance due
II. The penalty is calculated on an underpayment of $719 (tax liability
after March 2, 2015, because they paid 100 percent of their 2013 tax
of $4,299 times 90 percent, less tax withheld of $2,150, and timely
liability by Jan. 15, 2015, and meet the EXCEPTION TO INTEREST in
estimated payments made of $1,000) times the number of days late
PART II. Warren and Michelle paid $3,870 ($2,150 of withholding and
(90) times the daily interest rate (0.000082), which gives an under-
$1,720 in estimated payments) by Jan. 15, 2015.
payment of estimated tax interest penalty of $5.31. Even though
Example 3. Same facts as Example 2 except an estimated tax pay-
Warren and Michelle have an overpayment of taxes and will receive a
ment of $1,000 was made late on Jan. 31, 2015, and the amount paid
refund or carry-over credit of the overpaid taxes, they are still subject
with their return filed on March 16, 2015, was $1,149. Warren and
to the estimated underpayment interest penalty for not making the full
Michelle are subject to the estimated underpayment interest penalty in
amount of their estimated tax payments by Jan. 15, 2015, filing and
this situation because they did not make all their estimated payments
paying the amount due with a return filed by March 2, 2015, or mak-
by Jan. 15, 2015, and did not file their return by March 2, 2015. The
ing their total tax payments and credits for 2014 in at least the same
penalty is calculated on the underpayment of $1,719 (as calculated on
amount of last year’s taxable income times this year’s tax rate.
Line 5 of PART I: tax liability of $4,299 times 90 percent less tax with-
Example 6. Same facts as Example 5 except no payment was made
held of $2,150), times the number of days the liability was unpaid. In
with a timely filed extension. Warren and Michelle are subject to the
this case, there were two payments of the liability; the late payment
of the estimated tax on Jan. 31, 2015, of $1,000 and the payment of
estimated underpayment interest penalty in this situation because
the liability with the return on March 16, 2015, of $1,149. Therefore,
they did not make all their estimated payments by Jan. 15, 2015, did
the underpayment of estimated tax interest penalty is two calcula-
not file their return by March 2, 2015, and did not meet the EXCEP-
tions and totals $4.85: $1,719 total underpayment times 16 days
TION TO INTEREST in PART II. The penalty is calculated on an
late, times daily rate of 0.000082 = $2.26; $719 remaining under-
underpayment of $719 (tax liability of $4,299 times 90 percent, less
payment (total underpayment of $1,719 less $1,000 late estimated
tax withheld of $2,150, and timely estimated payments made of
payment) times 44 days remaining underpayment not paid times daily
$1,000) times the number of days late (90), times the daily interest
interest rate of 0.000082 = $2.59; $2.26 plus $2.59 = $4.85
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, 2015. 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, 2015, did not file their
rate of $0.09 per day for each day the taxes are unpaid in 2015.
return by March 2, 2015, and did not meet the EXCEPTION TO INTER-
Example 7. Same facts as Example 1 except Warren’s gross income
EST in PART II. The penalty is calculated on an underpayment of $719
from farming was $325,000. Warren and Michelle do not qualify as
(tax liability of $4,299 times 90 percent less tax withheld of $2,150
farmers and must complete Form REV-1630, Underpayment of
and timely estimated payments made of $1,000) times the number of
Estimated Tax by Individuals, to calculate their underpayment of esti-
days late (90) times the daily interest rate (0.000082), which gives an
underpayment of estimated tax interest penalty of $5.31.
mated tax interest penalty.
(Form on Page 4.)
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