• Instructions for Class 2220 - Introductory Material
    • Future Developments
  • Full general Instructions
    • Purpose of Form
    • Who Must File
    • Who Must Pay the Underpayment Punishment
      • Exception to the Penalty
    • How To Use Form 2220
  • Specific Instructions
    • Office I. Required Annual Payment
      • Line 1.
      • Line 2c.
      • Line 4. All filers (other than Due south corporations).
      • S corporations.
    • Role 2. Reasons for Filing
      • Lines 6 and 7. Adjusted seasonal installment method and/or annualized income installment method.
      • Line 8. Large corporations.
    • Part 3. Figuring the Underpayment
      • Line nine. Installment due dates.
      • Line ten. Required installments.
        • Large corporations.
      • Line eleven.
      • Cavalcade (a).
      • Columns (b), (c), and (d).
      • Line 17.
    • Office 4. Figuring the Penalty
    • Schedule A
      • Extraordinary items.
      • De minimis rule.
      • Part I. Adjusted Seasonal Installment Method
        • Line two.
        • Line 9b.
        • Line 15.
        • Line 16.
        • Line xviii.
      • Part Ii. Annualized Income Installment Method
        • Line 20. Annualization periods.
        • Line 21.
        • Line 22. Annualization amounts.
        • Line 23b.
        • Line 25.
        • Line 26.
        • Line 28.
      • Part III. Required Installments
        • Line 33.
        • Line 35.
        • Line 38.
  • Instructions for Class 2220 - Notices
    • Paperwork Reduction Human action Notice.

Instructions for Class 2220 (2021)

Underpayment of Estimated Taxation by Corporations

Section references are to the Internal Revenue Lawmaking unless otherwise noted.

2021

Instructions for Form 2220 - Introductory Material

Future Developments

For the latest information about developments affecting Form 2220 and its instructions, such as legislation enacted after they were published, get to IRS.gov/Form2220.

General Instructions

Purpose of Form

Corporations (including S corporations), tax-exempt organizations subject to the unrelated business organization income tax, and private foundations use Form 2220 to determine:

  • Whether they are subject to the punishment for underpayment of estimated taxation and, if so,

  • The amount of the underpayment punishment for the period that applies.

Who Must File

Generally, the corporation does not take to file this form with its income tax return because the IRS will figure the amount of whatsoever penalty and notify the corporation of any amount due. However, fifty-fifty if the corporation does non owe a penalty, complete and attach this form to the corporation's revenue enhancement return if the Role I, line three, amount is $500 or more and any of the following employ.

  1. The adjusted seasonal installment method is used.

  2. The annualized income installment method is used.

  3. The corporation is a large corporation (as defined in the instructions for Function 2, line 8) figuring its outset required installment based on the prior year's tax.

Who Must Pay the Underpayment Penalty

More often than not, a corporation is subject area to the penalty if it did non timely pay at least the smaller of:

  1. The tax shown on its 2021 return, or

  2. The revenue enhancement shown on its 2020 return (if it filed a 2020 return showing at to the lowest degree some corporeality of tax and the render was for a full 12 months). All the same, a large corporation tin base only its first required installment on the prior twelvemonth's tax.

In these instructions, "return" generally refers to the corporation's original render. However, an amended return is considered the original render if the amended return is filed by the due appointment (including extensions) of the original return. Also, for purposes of determining a required installment of a corporation'south estimated revenue enhancement, if an amended render is filed for the prior tax year, and then the render for the "prior tax year" includes the amended return, but only if the amended return is filed before the applicable installment due date.

The penalty is figured separately for each installment due date. Therefore, the corporation may owe a penalty for an earlier due date even if it paid enough revenue enhancement afterwards to make upwardly the underpayment. This is true fifty-fifty if the corporation is due a refund when its return is filed. However, the corporation may be able to reduce or eliminate the penalisation by using the annualized income installment method or the adjusted seasonal installment method. Meet the instructions for Office II for details.

Exception to the Penalty

A corporation will not have to pay a penalty if the tax shown on the corporation's 2021 return (the Form 2220, Part I, line 3, amount) is less than $500.

How To Utilize Form 2220

  • Consummate lines ane through 3 of Office I. If line three is $500 or more, consummate the rest of Part I to determine the required annual payment and go to Part 2.

  • Check one or more boxes in Part Ii if the corporation uses the adjusted seasonal installment method, the annualized income installment method, or if the corporation is a big corporation.

    If the corporation checked a box in Part 2, attach Form 2220 to the income tax render. Be sure to cheque the box on Form 1120, folio ane, line 34; or the comparable line of any other income tax return the corporation is required to file (for example, Form 1120-C, 1120-L, or 1120-S).

  • Complete Part III to determine the underpayment for any of the installment due dates.

  • If there is an underpayment on Part Three, line 17 (column (a), (b), (c), or (d)), go to Part IV to figure the penalisation.

  • Complete Schedule A if the corporation uses the adapted seasonal installment method and/or the annualized income installment method.

Specific Instructions

Role I. Required Annual Payment

Complete lines one through 5 to figure the corporation'south required almanac payment.

Line 1.

Generally, enter the tax from Course 1120, line 31; or the applicable line for other income tax returns. However, if that amount includes any tax attributable to a sale described in section 338(a)(1), do not include that tax on line 1. Instead, write "Sec. 338 gain" and show the amount of tax in brackets on the dotted line next to line one. This exclusion from the line 1 amount does not apply if a section 338(h)(x) ballot is made.

For data on how to figure the full tax for estimated tax purposes for other entities, see the following forms or their instructions.

• 990-PF • 1120-FSC • 1120-REIT
• 990-T • 1120-L • 1120-RIC
• 1120-C • 1120-ND • 1120-Southward
• 1120-F • 1120-PC • 1120-SF

Line 2c.

Enter the corporeality from Form 1120, Schedule J, line 20b, or the applicative line for other income tax returns.

Line four. All filers (other than S corporations).

Figure the corporation's 2020 tax the aforementioned way the corporeality on line 3 of this class was determined, using the taxes and credits from its 2020 tax return. Yet, skip line 4 and enter on line v the corporeality from line 3 if either of the following applies.

  • The corporation did not file a revenue enhancement return for 2020 that showed a liability for at least some amount of tax.

  • The corporation had a 2020 tax yr of less than 12 months.

S corporations.

Enter on line four the sum of:

  1. The total of the investment credit recapture revenue enhancement and the built-in gains tax shown on the return for the 2021 revenue enhancement twelvemonth, and

  2. Whatever excess cyberspace passive income revenue enhancement shown on the Due south corporation's render for the 2020 tax year.

If the 2020 tax twelvemonth was less than 12 months, skip line iv and enter on line v the corporeality from line 3.

Part Two. Reasons for Filing

Lines 6 and seven. Adjusted seasonal installment method and/or annualized income installment method.

If the corporation'south income varied during the year because, for instance, it operated its business organization on a seasonal basis, information technology may be able to lower or eliminate the corporeality of one or more required installments by using the adjusted seasonal installment method and/or the annualized income installment method.

Example.

A ski shop, which receives virtually of its income during the winter months, may do good from using one or both of these methods to figure its required installments. The annualized income installment or adapted seasonal installment may be less than the required installment under the regular method for one or more due dates. Using one or both of these methods may reduce or eliminate the punishment for those due dates.

Employ Schedule A (Grade 2220, pages 3 and 4) to effigy one or more required installments. If Schedule A is used for any payment due appointment, information technology must exist used for all payment due dates. To arrive at the amount of each required installment, Schedule A automatically selects the smallest of:

  • The adjusted seasonal installment (if applicable),

  • The annualized income installment (if applicable), or

  • The regular installment nether section 6655(d)(1) (increased by whatsoever recapture of a reduction in a required installment under department 6655(e)(1)(B)).

Follow the steps below to make up one's mind which parts of the form have to be completed.

  • If the corporation is using only the adapted seasonal installment method, check the box in Office II, line half dozen, and complete Schedule A, Parts I and 3.

  • If the corporation is using just the annualized income installment method, check the box in Function II, line 7, and complete Schedule A, Parts II and III.

  • If the corporation is using both methods, bank check the boxes in Part 2, lines 6 and 7, and complete all three parts of Schedule A.

Line viii. Big corporations.

A large corporation is a corporation (other than an Due south corporation) that had, or whose predecessor had, taxable income (defined beneath) of $one one thousand thousand or more for any of the 3 tax years immediately preceding the 2021 tax twelvemonth, or if less, the number of years the corporation has been in being. See Regulations section 1.6655-four.

Taxable income, for this purpose, is modified to exclude cyberspace operating loss and capital loss carrybacks and carryovers. Members of a controlled group, as defined in section 1563, must divide the $1 meg amount among themselves nether rules similar to those in section 1561. If the corporation is a large corporation figuring its start required installment based on the prior year'south revenue enhancement, check the box on Part II, line 8, and, if applicative, check the box(es) on Part II, line 6 and/or line 7. As well, if applicable, complete Schedule A, Parts I, 2, and 3, as discussed below in the instructions for line x.

Part Iii. Figuring the Underpayment

Line nine. Installment due dates.

The corporation is generally required to enter the 15th day of the 4th (Course 990-PF filers, use the 5th calendar month), 6th, ninth, and 12th months of its revenue enhancement year.

Note.

Multiple columns can take the aforementioned due engagement if the due date has been extended by relief provided by the IRS (for example, disaster relief).

Line 10. Required installments.

If the box on line vi and/or line 7 is checked, enter the amounts from Schedule A, line 38.

Large corporations.

Big corporations, follow the instructions beneath.

  1. If the box on line 8 (but non line 6 or line seven) is checked and line three is smaller than line four, enter 25% of line three in columns (a) through (d) of line 10.

  2. If the box on line 8 (but not line 6 or line 7) is checked and line 4 is smaller than line three, enter 25% of line 4 in cavalcade (a) of line 10. In column (b), effigy the corporeality to enter as follows:

    1. Subtract line iv from line 3,

    2. Add the result to the amount on line three, and

    3. Multiply the total in item b above by 25%, and enter the result in column (b).

    In columns (c) and (d), enter 25% of line iii.

  3. If the box on line eight and the box on line 6 and/or line 7 are checked, follow the instructions in items i and 2 in a higher place (substituting "Schedule A, line 35" for "line 10" in the adding). Enter the amounts from Schedule A, line 38, on line x.

Line 11.

Enter the estimated revenue enhancement payments made past the corporation for its tax yr as indicated below. Include any overpayment from the corporation's 2020 revenue enhancement return that was credited to the corporation's 2021 estimated tax. If an installment is due on a Saturday, Lord's day, or legal holiday, payments made on the next day that is not a Saturday, Sunday, or legal vacation are considered made timely to the extent the payment is applied confronting that required installment.

Cavalcade (a).

Enter payments fabricated by the appointment on line nine, column (a).

Columns (b), (c), and (d).

Enter payments made by the date on line 9 for that column and afterward the date on line 9 of the preceding cavalcade.

Line 17.

If whatever of the columns in line 17 shows an underpayment, complete Office IV to figure the penalisation.

Role IV. Figuring the Punishment

Complete lines 19 through 38 to make up one's mind the corporeality of the penalty. The penalty is figured for the menstruum of underpayment using the underpayment rate determined under section 6621. The period of underpayment by and large runs from the installment due date to the before of the appointment the underpayment is actually paid or the 15th solar day of the 4th month later on the close of the tax yr. C corporations with tax years ending June 30 and Southward corporations, apply the tertiary calendar month instead of the 4th calendar month. Form 990-PF and 990-T filers utilize the 5th month instead of the fourth calendar month.

Annotation.

A corporation with a short tax year catastrophe anytime in June will be treated as if the short tax year ended on June 30.

A payment of estimated tax is practical against unpaid required installments in the society in which installments are required to be paid, regardless of the installment to which the payment pertains.

Example.

A corporation with a calendar tax year underpaid the April xv installment by $1,000. The June fifteen installment requires a payment of $two,500. On June 10, the corporation deposits $2,500 to embrace the June fifteen installment. Yet, $1,000 of this payment is applied against the April fifteen installment. The penalty for the April 15 installment is figured from April fifteen to June 10 (56 days). The remaining $i,500 is applied to the June 15 installment.

If the corporation has made more than one payment for a required installment, attach a carve up computation for each payment. Also, if the corporation has a financial tax twelvemonth and has an underpayment period that extends beyond the latest date in Part Four, attach a computation of the penalty for that menstruation. Include the penalty in the total for line 38.

Schedule A

Extraordinary items.

Mostly, under the annualized income installment method, extraordinary items must be taken into account after annualizing the taxable income for the annualization menstruum. Similar rules employ in determining taxable income nether the adapted seasonal installment method. An extraordinary particular includes:

  • Any item identified in Regulations section
    1.1502-76(b)(2)(two)(C)(1), (two), (3), (four), (7), and (8);

  • A net operating loss carryover;

  • A section 481(a) adjustment;

  • Net proceeds or loss from the disposition of 25% or more of the fair market value of the corporation's business organisation assets during the tax year;

  • Whatsoever other item designated equally an boggling particular in the Internal Revenue Bulletin.

These extraordinary items must exist accounted for in the appropriate annualization flow. Nevertheless, a net operating loss deduction and a section 481(a) aligning (unless the corporation makes the alternative choice under Regulations section ane.6655-ii(f)(3)(ii)(C)) are treated as extraordinary items occurring on the outset twenty-four hour period of the tax twelvemonth in which the detail is taken into account in determining taxable income.

De minimis rule.

Boggling items identified above that are de minimis as described below (other than a internet operating loss carryover or a section 481(a) aligning) may be annualized using the general rules of Regulations section one.6655-ii(f), or, if the corporation chooses, may exist taken into business relationship after annualizing the taxable income for the annualization period. A de minimis boggling item is any extraordinary particular resulting from a transaction in which the total extraordinary items resulting from such transaction is less than $ane million.

In Schedule A, Office II, make the appropriate adjustments to annualized taxable income before figuring the estimated tax for each reporting menses. Similar adjustments must exist made, if applicative, to Part I of Schedule A if the adjusted seasonal installment method applies. Run into the instructions for Schedule A, lines 2, 9b, 21, and 23b beneath. For more than information regarding extraordinary items, run across Regulations department ane.6655-2(f)(3)(two) and the examples in Regulations department ane.6655-2(f)(3)(7).

Office I. Adjusted Seasonal Installment Method

The corporation can use the adapted seasonal installment method simply if the corporation'south base of operations flow percent for whatever 6 consecutive months of the tax year is 70% or more. The base period percentage for whatsoever menses of 6 consecutive months is the boilerplate of the 3 percentages figured by dividing the taxable income for the corresponding 6-consecutive-month period in each of the iii preceding tax years by the total taxable income for each of the 3 preceding revenue enhancement years, respectively. Figure the base period pct using the 6-month catamenia in which the corporation normally receives the largest part of its taxable income.

Example.

An entertainment park with a 2021 calendar tax yr receives the largest office of its taxable income during the 6-calendar month period from May through Oct. To compute its base of operations menstruation percent for this vi-month flow in 2021, the amusement park figures its taxable income for each May–October catamenia in 2018, 2019, and 2020. It so divides the taxable income for each May–October menses by the total taxable income for that particular tax year. The resulting percentages are 69% (0.69) for May–October 2018, 74% (0.74) for May–Oct 2019, and 67% (0.67) for May–October 2020. Because the average of 69%, 74%, and 67% is 70%, the base of operations period percentage for May–October 2021 is lxx%. Therefore, the entertainment park qualifies for the adapted seasonal installment method.

Line 2.

If the corporation has certain extraordinary items, special rules apply. Do not include on line two the de minimis items that the corporation chooses to include on line 9b. See Extraordinary items , before.

Line 9b.

If the corporation has extraordinary items that are non de minimis, a net operating loss deduction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 9b for the appropriate flow. Also include on line 9b the de minimis items that the corporation chooses to exclude from line 2. Run into Extraordinary items , earlier.

Line 15.

But trusts liable for tax on unrelated business taxable income may exist liable for alternative minimum tax (AMT) on certain adjustments and tax preference items. Class 990-T filers compute AMT on Schedule I (Form 1041), Culling Minimum Tax—Estates and Trusts, if applicable. Figure alternative minimum taxable income (AMTI) based on the trust's income and deductions for the months shown in the cavalcade headings straight above line one.

Line 16.

Enter on line sixteen any other taxes the corporation owed for the months shown in each column heading direct above line i. Include the aforementioned taxes used to effigy Class 2220, Part I, line 1, including the base erosion minimum tax, if applicative. Practise not include the personal holding company tax and interest due nether the await-back method of section 460(b)(2) for completed long-term contracts or section 167(g)(two) for property depreciated nether the income forecast method.

Line 18.

Enter the credits the corporation is entitled to for the months shown in each column heading above line 1. Enter the aforementioned type of credits that are immune on Grade 2220, page 1, lines 1 and 2c.

Function II. Annualized Income Installment Method

Line 20. Annualization periods.

Enter on line twenty, columns (a) through (d), respectively, the annualization periods for the option shown in the tables beneath. For example, if the corporation elected Option 1, enter on line 20 the annualization periods 2, iv, 7, and 10, in columns (a) through (d), respectively.

. This is an Image: caution.gif Use Option 1 or Option 2 only if the corporation elected to do so by filing Course 8842, Election To Employ Different Annualization Periods for Corporate Estimated Tax, by the due appointment of the first required installment payment. One time made, the election is irrevocable for the particular tax year. Choice 2 is not available to tax-exempt organizations and private foundations. For these entities, see the options shown in the tabular array in the instructions for line 22. .

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Corporations

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Tax-Exempt Organizations and Individual Foundations

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Line 21.

Enter on line 21 the taxable income (line 30, Form 1120; or the applicable line for other income tax returns) that the corporation received for the months entered for each annualization period in columns (a) through (d) on line 20. If the corporation has extraordinary items, special rules apply. Do not include on line 21 the de minimis extraordinary items that the corporation chooses to include on line 23b. See Extraordinary items , earlier.

Line 22. Annualization amounts.

Enter on line 22, columns (a) through (d), respectively, the annualization amounts shown in the tables below for the option used for line 20 above. For example, if the corporation elected Pick i, enter on line 22 the annualization amounts 6, 3, 1.71429, and 1.two, in columns (a) through (d), respectively.

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Corporations

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Tax-Exempt Organizations and Private Foundations

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Line 23b.

If the corporation has extraordinary items that are not de minimis, a net operating loss deduction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 23b. As well include on line 23b the de minimis boggling items that the corporation chooses to exclude from line 21. See Boggling items , earlier.

Line 25.

Only trusts liable for tax on unrelated business organisation taxable income may exist liable for culling minimum tax (AMT) on certain adjustments and revenue enhancement preference items. Form 990-T filers compute AMT on Schedule I (Form 1041). Figure AMTI based on the trust's income and deductions for the annualization menstruum entered in each cavalcade on line 20.

Line 26.

Enter whatever other taxes the corporation owed for the months shown in each column on line 20. Include the aforementioned taxes used to figure Course 2220, Office I, line 1, including the base erosion minimum tax, if applicable. Practise not include the personal property company revenue enhancement and involvement due under the look-back method of section 460(b)(2) for completed long-term contracts or section 167(g)(2) for holding depreciated under the income forecast method.

Line 28.

Enter the credits the corporation is entitled to for the months shown in each cavalcade on line 20. Do not annualize whatsoever credit. Yet, when figuring the credits, annualize any detail of income or deduction used to figure the credit.

Part 3. Required Installments

Line 33.

Before completing line 33 in columns (b) through (d), complete lines 34 through 38 in each of the preceding columns. For example, consummate lines 34 through 38 in column (a) earlier completing line 33 in cavalcade (b).

Line 35.

Enter in each cavalcade of line 35, 25% of the corporeality from page ane, Part I, line five. Large corporations, run across the instructions for line 10 for the amounts to enter.

Line 38.

For each installment, enter the smaller of line 34 or line 37 on line 38. Besides enter the consequence on page 1, Part III, line 10.

Instructions for Class 2220 - Notices

Paperwork Reduction Act Notice.

We ask for the information on this class to carry out the Internal Revenue laws of the United states of america. You are required to give us the data. We need it to ensure that you lot are complying with these laws and to let us to figure and collect the right corporeality of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the course displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents tin become material in the administration of any Internal Revenue constabulary. By and large, tax returns and return information are confidential, every bit required by department 6103.

The time needed to consummate and file this form will vary depending on individual circumstances. The estimated brunt for business taxpayers filing this form is approved nether OMB control number 1545-0123 and is included in the estimates shown in the instructions for their business income tax return.

If you have comments apropos the accuracy of these time estimates or suggestions for making this course simpler, we would exist happy to hear from you. See the instructions for the tax return with which this form is filed.