I must compute penalty for not paying estimated tax in 2016 for a trust. Form 2210 says a trust must use 11/30/16 as the end date of the year. (see details).

[notacpa99]

To compute the penalty, Form 2210 uses 11/30/16 as end date for the year for trusts, although for individuals it is 12/31/16. My question is, how do I handle trust income received in December 2016? Its very confusing - is the trust not responsible for a penalty on December's income?  Is December's amount supposed to be computed the following year?   Thanks for any light to be shed on this.

[tagteam · Accepted solution]

" Form 2210 uses 11/30/16 as end date for the year for trusts, although for individuals it is 12/31/16. "

If you look at the instructions for the form, you will notice that trusts and estates indeed use different ending dates but they also use different (higher) annualization amounts than individuals (6, 3, 1.71429, and 1.09091)

[notacpa99]

Found this in an IRS manual:

1. Estates and trusts electing to use the annualized income installment method have the same estimated tax payment due dates as individuals. However, the installment is computed by placing on an annualized basis the income for months in the taxable year ending the second month preceding the month that contains the due date for the installment.  [that is, for last installment, Nov. 30]

   Because income received in December is not included in annualized income of an estate or trust, the required annual payment of an estate or trust can be less than both 90% of current year tax and 100% of prior year tax. This will be the case when the taxpayer chooses to annualize, and taxable income received through November 30th is less than 11/12 of total taxable income for the year.