The Underpayment of Estimated Tax by Corporations Penalty applies to corporations that don't pay enough estimated tax payments or pay them late. The penalty may apply even if we owe you a refund. Corporations generally pay quarterly estimated tax payments if they expect to owe $500 or more in estimated tax when they file their tax return. Find how to figure and pay estimated tax. How You Know You Owe the Penalty We send you a notice or letter if you owe the Underpayment of Estimated Tax by Corporations Penalty. For more information, see Understanding Your IRS Notice or Letter. How We Calculate the Penalty We calculate the amount of the Underpayment of Estimated Tax by Corporations Penalty based on the tax shown on your original return or on a more recent return that you filed on or before the due date. The tax shown on the return is your total tax minus your total refundable credits. We calculate the penalty based on: The amount of the underpayment The period when the underpayment was due and underpaid The interest rate for underpayments that we publish quarterly Interest on a Penalty We charge interest on penalties. The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest. Pay a Penalty Send us a payment or pay your estimated taxes in full on time to stop future penalties and interest from adding up. Remove or Reduce a Penalty We may remove or reduce a penalty if any of the following apply: You owe less than $500 You can show cancelled checks or other documents with the amount and date you made estimated tax payments You are a member of a consolidated group that is figuring its first required installment based on prior year's tax If exceptions do apply and result in a lower penalty, you can ask us to adjust the amount of the penalty. Send Form 2220, Underpayment of Estimated Tax by Corporations or, if applicable, Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts to the address on the payment stub of your notice. Include a signed letter confirming the accuracy of the form and payments for all penalties you calculated. Dispute a Penalty While we can't adjust the Underpayment of Estimated Tax by Corporations Penalty for reasonable cause, we may consider making an adjustment if we imposed the penalty after you relied on incorrect written advice we gave you. Check if you meet the following criteria: The written advice we gave you was in direct response to your written request for advice The incorrect written advice we gave you was not the result of material omissions or misinformation in your written request for advice You reasonably relied on our written advice and were penalized based on that advice If you believe you meet the criteria, mail a statement signed under penalty of perjury that describes how our erroneous written advice resulted in the penalty. Include a copy of both the written request for advice you sent us and our written response. Mail the original statement and copies of the supporting documents to the address on your penalty notice. Keep a copy of the documents you sent to us. When you sign a statement under penalty of perjury, you may be found guilty of a crime if you knowingly lie in your statement. Avoid a Penalty To avoid a penalty, do the following: Make installment estimated tax payments when you expect your total tax for the year (less applicable credits) to be $500 or more Make installment payments by the 15th day of the 4, 6, 9 and 12 months of the tax year. If any date falls on a Saturday, Sunday or a legal federal holiday, the installment is due on the next regular business day Use electronic funds transfer to make installment payments of estimated tax Apply for a quick refund if you overpay your estimated tax. Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. Follow the instructions for Schedule J, Part III, line 15. Apply for a Payment Plan If you can't pay the full amount of your taxes or penalty on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan. Get Help For help with a penalty, call the phone number on your notice or letter. If you didn’t receive a letter or notice, use telephone assistance. Law and Regulations Failure by a Corporation to Pay Estimated Income Tax — Internal Revenue Code § 6655 Additions to Tax for Corporations — Estimated tax – 26 Code of Federal Regulations § 1.6655-1 Estimated Tax for Consolidated Corporate Returns — 26 Code of Federal Regulations § 1.1502-5 Related Topics Special Filing Season Alerts IRS Operations Status Form 2220, Underpayment of Estimated Tax by Corporations (PDF) Forms, Instructions & Publications Publication 1, Your Rights as a Taxpayer (PDF) Publication 542, Corporations (PDF) Need help? You can authorize someone to contact the IRS on your behalf. See if you qualify for help from a Low Income Taxpayer Clinic. If you can’t find what you need online, call the IRS number at the top of your notice or letter. If you didn’t receive a letter or notice, use telephone assistance. If you can't resolve the penalty on your own, contact Taxpayer Advocate Service, an independent organization within IRS.
