Form Cd-429b - Underpayment Of Estimated Tax By C Corporations Page 2
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CD-429B
General Instructions
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Purpose of Form CD-429B
Corporations use Form CD-429B to determine whether the corporation owes interest on the underpayment of estimated tax
and, if so, the amount of interest.
Corporations Required to Pay Estimated Tax
A corporation that reasonably expects to incur an income tax liability to North Carolina of $500 or more during the taxable
year must make estimated tax payments. If the corporation’s tax year is less than four months, estimated tax payments are
not required. Estimated tax is the amount of income tax a corporation expects to owe for the tax year after subtracting the
amount of any tax credits claimed for the tax year.
Who Must Pay Interest on the Underpayment of Estimated Tax
Generally, a corporation is subject to interest on the underpayment of estimated tax if the income tax due on its 2013 corporate
tax return is $500 or more and the corporation did not timely pay at least the smaller of either of the following:
•
90% of the income tax due on the 2013 corporate tax return.
•
100% of the income tax due on the 2012 corporate tax return.
This two-part test does not apply to large corporations, as defined in IRC § 6655. A large corporation is subject to interest on
the underpayment of estimated tax if the income tax due on its 2013 corporate tax return is $500 or more and the corporation
did not timely pay at least 90% of the income tax due on the 2013 corporate tax return.
Annualized Income Installment Method
A corporation may be able to reduce or eliminate the interest on the underpayment of estimated tax by using the annualized
income installment method. A corporation may annualize income for any of the following:
For the first 3 months if the installment was required to be paid in the 4th month.
•
For the first 3 months or for the first 5 months if the installment was required to be paid in the 6th month.
•
For the first 6 months or for the first 8 months if the installment was required to be paid in the 9th month.
•
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 income, 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). Retain your computations for future reference.
Specific Line-By-Line Instructions
Part 1. Computation of Underpayment
Complete Part 1 of Form CD-429B to determine if there is an underpayment for any of the four payment periods. If there is
an underpayment on Line 12, Columns (a) - (d), go to Part 2, Computation of Underpayment of Estimated Tax. The interest
is calculated separately for each installment due date. Therefore, the corporation may owe interest for an earlier due date,
even if it paid enough tax later to make up the underpayment. This is true even if the corporation is due a refund when the
return is filed.
Part 2. Computation of Underpayment of Estimated Tax
Complete Lines 14 through 22 to determine the amount of interest on the underpayment of estimated tax. The interest is
figured for the period of underpayment using the rate determined under G.S. 105-241.21(a). The rate is set semiannually
by the Secretary of Revenue and is available on the Department’s website,
A payment of estimated tax is applied first to any previous underpayment of a required installment, regardless of the installment
to which the payment pertains. If the corporation makes more than one payment for a required installment, make separate
computations for each payment.
Example. A corporation underpaid the April 15 installment by $1000. The June 15 installment required a payment of $2500.
The corporation timely paid $2500 to cover the June 15 installment. However, $1000 of the June 15 payment is applied to
the underpayment of the April 15 installment. The interest on the underpayment of estimated tax for the April 15 installment
is calculated based on the period from April 16 through June 15. The remaining $1500 will be applied to the June 15 installment
as if it were made on June 15.
Do not attach Form CD-429B to the corporation’s tax return. Retain for your records.
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