Form Ia 2220 - Underpayment Of Estimated Tax By Corporations And Financial Institutions - 2014 Page 2
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1
22014 IA 2220 Instructions
Purpose of Form
Line 12: Exception 3 - Tax on Annualized Income
Form IA 2220 will enable corporations and financial
This section applies if the corporation or financial
institutions to determine if they paid the correct
institution made an estimated tax payment of at least
amount of estimated tax by the proper due date. If the
100% of the amount it would owe if its estimated tax
minimum
amount
was
not
paid
timely,
an
were a tax computed on annualized taxable income for
underpayment penalty is imposed for the period of the
the months preceding an installment date.
underpayment. This form helps you to determine
A corporation or financial institution may thus annualize
whether or not you are subject to such a penalty.
its income:
Estimated Tax
1.
For the first 3 months if the installment was
Every corporation or financial institution with $1,000 or
required to be paid in the 4th month;
more in tax due after credits is required to file
2.
For the first 3 months or the first 5 months if the
estimated tax.
installment was required to be paid in the 6th
month;
Use of 2014 Form
3.
For the first 6 months or the first 8 months if the
The 2014 form must be used for taxable years
installment was required to be paid in the 9th
beginning on or after January 1, 2014.
month; and
Exceptions that Avoid the Underpayment Penalty
4.
For the first 9 months or for the first 11 months if
No penalty will be charged for any underpayment on
the installment was required to be paid in the 12th
line 8 if:
month.
1.
All of the payments were made on or before the
To annualize, multiply taxable income for the period by
due date of the installment; and
12 and divide the resulting amount by the number of
2.
The total payments made by that installment date
months in the period (3, 5, 6, 8, 9, or 11, as the case
equal or exceed the amount which would have
may be). Enclose corporation income statements for
been due if the estimated tax were calculated
appropriate months in the tax period.
using any of the exceptions listed below.
Overpayment
A different
exception
may be
applied
to
each
A payment of estimated tax on any installment date is
underpayment. If there has been an underpayment of
considered a payment of any previous underpayment
the amount of the estimated tax, and the taxpayer
only to the extent the payment exceeds the amount of
believes that one or more of the exceptions to the
the installment as computed on line 5.
penalty precludes the assertion of the underpayment
penalty, the taxpayer should complete lines 9 through
To Compute Penalty
12 showing the applicability of any exception upon
Use the following formula:
which the taxpayer relies. If no exception applies,
daily %
number of
complete lines 13 through 19 to determine the amount
Penalty
=
x
x Underpayment
rate
days
of the penalty on the underpayment from line 8.
(line 17)
Line 10: Exception 1 - Prior year’s tax
(line 16)
(line 14)
This
exception
allows
corporations
and financial
The daily percentage rate is:
institutions to substitute for the current year’s estimate
5% per annum = 0.013699% per day (1/1/14 - 12/31/14)
the amount of the tax shown on the return for the
preceding taxable year. This exception may be utilized
5% per annum = 0.013699% per day (1/1/15 - 12/31/15)
only if the preceding taxable year was a taxable year of
Date of payment (line 15): Once a payment is made to
12 months and a return showing a tax liability (including
cover an exception to the penalty, the underpayment is
a “zero” liability) was filed for that year. Corporations or
no longer outstanding, so the penalty computation
financial institutions filing an initial year Iowa return may
stops at the date that payment is made.
not use Exception 1.
Please enclose this form with your corporation income
Line 11: Exception 2 - Tax on prior year’s
tax return, form IA 1120 or form IA 1120F.
income using current year’s rates
This
exception allows
corporations
and financial
Questions:
institutions to use a tax computed by using the current
Call 515-281-3114 or 800-367-3388
year’s rates but otherwise on the basis of the facts and
Additional information can be found on the Department
law applicable to the prior year. Corporations and
website ( ).
financial institutions filing an initial year Iowa return
Email: idr@iowa.gov
may not use Exception 2.
45-006b (10/08/14)
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