Form 2210 Line 8 Underpayment Penalty

[genie187]

Hi, I'm trying to match my software's calculation of my underpayment penalty with instructions for Form 2210 line 8.  I know it's currently a draft, but the basic instructions say:

To figure your 2018 tax, first add the amounts listed in (1) later, then
subtract from that total amount the refundable credits listed in (2)
later that are shown on your 2018 tax return.

My software seems to be doing that, however it also seems to be adding in line 13 from the 2018 1040.

I can't find anywhere in the instructions where it says to add in line 13.

[SusanY1]

If you do not have any credits to subtract or any of the additions specified in the instructions it would be expected for Line 8, which represents your prior year tax liability, to be the same as your 2018 Form 1040 line 13 total tax.  

If you are seeing the same number on Line 8 of Form 2210 as you see on your Line 13 of your 2018 Form 1040, this may be correct.  If you are seeing that Line 8 of 2210 is double the line 13 from your 2018 Form 1040, then it sounds like there is an entry error. 

[genie187]

Hi, Susan.  Thanks for replying.  What I'm saying is I'm trying to figure out why it's adding line 13 from the 2018 return when the instructions for Form 2210 don't mention adding it in the calculation of line 8.  

[SusanY1]

While it doesn't pull directly from Line 13 of your Form 1040, the result of the tax calculation for Line 8 of Form 2210 is very often exactly the same number as Line 13 on Form 1040.

Both forms are calculating your total tax liability for 2018, and while they use different methods they should arrive at the same number for total tax.

Form 2210 can have some additional adjustments to this number, but it is very often the case that the numbers are identical. This doesn't mean it is adding in that number, just that it is arriving at the same result for the total tax as part of its calculation.

[genie187]

I see now it shows a box of how they calculated.  They basically use the same instructions from Form 2210 but they say to start with your 2018 "tax after credits" from line 13.  I'm not saying they're wrong, but I'm just trying to figure out why the instructions for Form 2210 don't mention this.  

[SusanY1]

I find at times that the instructions are more complicated than they need to be, and this seems to be one of those cases!

Perhaps the instructions were modified from prior years when the total tax would have been on a different line number depending on whether the taxpayer filed on form 1040, 1040A, or 1040EZ.   In those years, it wouldn't have been possible to instruct the taxpayer to reference a specific line since the total tax was in a different place on each form. 

Now that we don't have that variation, I suspect they have just not updated the form to adjust for that.  Of course, this is just pure conjecture on my part! 

[genie187]

I think I might be misreading the instructions for Form 2210.  It actually says to figure your 2018 tax, follow those instructions.  I guess that's only one portion of computing the "Maximum".  I guess they don't really tell you specifically how to calculate the maximum, but it appears they are plugging in the numbers from 2018 for the first 4 lines of Form 2210 to figure the "Maximum".  

[AlexanderS08]

You are correct. The software is trying to calculate the minimum estimated based on either your 2018 actual tax or your 2019 estimated tax. You must pay the lesser of 100% of your 2018 tax or 90% of your estimated 2019 tax. 

[stephaneroy]

I'm so glad I found this thread, even if it's old. The 2210 instructions for line 8 are just completely wrong, and omit the basic tax calculation from the list of things to add.

[lellis1936]

Yes, line 8 instructions are wrong, and they have been wrong since 2012!

If you Google for 2210 instructions year 2011, you'll find a much shorter, yet correct description.

Since 2012 they have completely omitted directions for including the base tax for the year in the calculations.

[billy-hill]

So I looked, and I don't even have a form 2210 in 2019 tax year (and probably never have)! I used a 1040 and found a line 6 in the Federal Carryover section with an amount for 2210 or 2210 F. Is that what I am supposed to be using? and out of curiosity, I've been using TT for ten years or so now. With the exception of COVID and my work now at a complete standstill, not much else has changed. So why am I seeing this dialog box for the first time now for TY 2020?

[KathrynG3]

Yes, but be sure you are in the correct year for that number. The starting point for Form 2210 is what amount of tax was charged in the prior year.

This is because the IRS is expecting you to pay in either 90% of the current year tax evenly throughout the year or 100%(110% if your income is above $150,000) of the prior year tax throughout the current year to avoid penalties and interest. 

The purpose of Form 2210 is to "annualize" your income. The IRS has the default position that your income was earned evenly throughout the year. Therefore, they expect to receive payments throughout the year and are allowed to assess penalties and interest if those payments are delayed or did not occur. 

Form 2210 notifies the IRS that income was not earned evenly and reports the periods that income was earned so that any penalties or interest are mitigated. 

For more information: How do I add Form 2210?

@billy-hill

[billy-hill]

Thanks @KathrynG3 ,

As I stated, I did not see a form 2210 in my 2019 TY form 1040. Only in the Federal carryovers worksheet do I see a line 6 that says tax liability for form 2210 or 2210 F . I do use a Mac OS Mojave.

So it sounds safe to assume that since most of my income last year due to Unemployment Insurance (UI) (electively taxable, and I only elected about half the time). So the 10% withheld on Fed tax from UI was no where near what I regularly make and therefore did not reach the 90% threshold??

As I tried to finish the TT for 2020 the software told me the 2210 form will not be available until 2/11/21, so I can't complete it anyhow just yet it seems.

[KathrynG3]

The IRS will not penalize you if one of two conditions are met. In circumstances with income less than $150,000, either 100% of the prior year tax or 90% of the current year tax is paid in. Since you have paid in taxes, the current year threshold will likely be met. 

For example, in general, if your taxable income for 2020 was $9,000 and $900 was the tax due, the 90% calculation would be $900*90%=$810. If at least the $810 in this example was paid, there would be no penalty or interest charged. 

Yes, Form 2210 will be available soon.

You're welcome @billy-hill!

[Mshanesbox]

Does this then mean that I did not fully pay my taxes in 2019 while using the TurboTax tool?  I am trying to understand my error in receiving the penalty.  I did not work for the first 5 months of 2020 so my gross income was notably less than 2019.