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Instructions for Form 2210 2006 Tax Year

Specific Instructions

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Part I—Required Annual Payment

Complete lines 1-9 to figure your required annual payment.

If you file an amended return by the due date of your original return, use the amounts shown on your amended return to figure your underpayment. If you file an amended return after the due date, use the amounts shown on the original return.

Exception.   If you and your spouse file a joint return after the due date to replace previously filed separate returns, use the amounts shown on the joint return to figure your underpayment.

Line 1

Enter the amount from Form 1040,
line 57; Form 1040A, line 35;
Form 1040NR, line 52; or
Form 1040NR-EZ, line 15. For an estate or trust, enter the amount from Form 1041, Schedule G, line 4.

Line 2

Enter the total of the following amounts on line 2.

  • Self-employment tax.

  • Tax from recapture of investment credit, low-income housing credit, qualified electric vehicle credit, Indian employment credit, new markets credit, or credit for employer-provided childcare facilities.

  • Tax on early distributions from (a) an IRA or other qualified retirement plan, (b) an annuity, or (c) a modified endowment contract entered into after June 20, 1988.

  • Tax on distributions from a Coverdell education savings account or a qualified tuition program not used for qualified education expenses.

  • Tax on Archer MSA or health savings account distributions not used for qualified medical expenses.

  • Section 72(m)(5) penalty tax.

  • Advance earned income credit payments.

  • Tax on accumulation distribution of trusts.

  • Interest due under sections 453(l)(3) and 453A(c) on certain installment sales of property.

  • An increase or decrease in tax as a shareholder in a qualified electing fund.

  • Tax on electing small business trusts included on Form 1041, Schedule G,
    line 7.

  • Tax on income not effectively connected with a U.S. trade or business from Form 1040NR, lines 53 and 56.

  • Household employment taxes, before subtracting any advance EIC payments made to your employees. Do not include this amount if you will enter -0- on Form 2210, line 6, and the amount on line 4 (excluding household employment taxes) would be less than $1,000.

Line 4

If Form 2210, line 4, is less than $1,000, you do not owe the estimated tax penalty. Do not file Form 2210.

Line 6

Enter the taxes withheld from
Form 1040, lines 64 and 67; Form 1040A, line 38, plus any withheld amount written in on line 43; Form 1040NR, lines 59, 61, 66, 67, and 68; or Form 1040NR-EZ, line 18. For an estate or trust, enter the amount from Form 1041, line 24e.

Line 8

Enter the tax shown on your 2005 tax return (110% of that amount if the adjusted gross income shown on that return is more than $150,000, or, if married filing separately for 2006, more than $75,000). Figure your 2005 tax using the taxes and credits shown on your 2005 tax return. Use the same type of taxes and credits as shown on lines 1, 2, and 3 of this Form 2210.

If you are filing a joint return for 2006, but you did not file a joint return for 2005, add the tax shown on your 2005 return to the tax shown on your spouse's 2005 return and enter the total on line 8 (figured as explained above).

If you filed a joint return for 2005 but you are not filing a joint return for 2006, see chapter 4 of Pub. 505 to figure your share of the 2005 tax to enter on line 8.

If you did not file a return for 2005 or your 2005 tax year was less than 12 months, do not complete line 8. Instead, enter the amount from line 5 on line 9. However, see Exceptions to the Penalty on page 1.

Part III—Short Method

If you can use the short method, complete lines 10-14 to figure your total underpayment for the year, and lines 15-17 to figure the penalty.

In certain circumstances, the IRS will waive all or part of the underpayment penalty. See Waiver of Penalty on
page 2.

Line 12

If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

Line 15

Most taxpayers use the .05258 factor to figure line 15. Taxpayers affected by Hurricane Katrina (see Hurricane Katrina Relief on page 2) should cross out .05258 and enter .03468.

Part IV—Regular Method

Use the regular method if you are not eligible to use the short method.

Hurricane Katrina Relief

If you are eligible for relief due to Hurricane Katrina (see Hurricane Katrina Relief on page 2), you will need to modify Part IV as follows.

  • Do not complete lines 18 through 30 in columns (a) and (b).

  • Change the date above lines 18
    and 29 in column (c) from 9/15/06 to
    10/16/06.

  • If box C in Part II applies, add the amounts on Schedule AI, line 25, in columns (a), (b), and (c), and enter the total on line 18 in column (c) of Part IV.

  • If you are not using Schedule AI, enter 75% (.75) of line 9, Form 2210, on line 18 in column (c) of Part IV.

  • Include on line 19 in column (c), estimated tax payments made through October 16, 2006.

  • In column (c), enter the amount from line 19 on line 23. Do not make entries on lines 20, 21, 22, and 24.

Form 1040NR or 1040NR-EZ Filers

If you are filing Form 1040NR or 1040NR-EZ and did not receive wages as an employee subject to U.S. income tax withholding, the instructions for completing Part IV are modified as follows.

  1. Skip column (a).

  2. In line 18, column (b), enter ½ of the amount on line 9 of Part I (unless you are using the annualized income installment method).

  3. In line 19, column (b), enter the total tax payments made through June 15, 2006, for the 2006 tax year. If you are treating federal income tax (and excess social security or tier 1 railroad retirement tax) as having been withheld evenly throughout the year, you are considered to have paid ⅓ of these amounts on each payment due date.

  4. Skip all lines in column (b) that are shaded in column (a).

Section A—Figure Your Underpayment

Line 18

Enter on line 18, columns (a)-(d), the amount of your required installment for the due date shown in each column heading. For most taxpayers, this is ¼ of the required annual payment shown on Part I, line 9. However, it may be to your benefit to figure your required installments by using the annualized income installment method. See the Schedule AI instructions beginning on page 5.

Line 19

Enter the estimated tax payments you made for the 2006 tax year, plus any federal income tax and excess social security and tier 1 railroad retirement tax withheld. If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

In column (a), enter the tax payments you made by April 15, 2006; in column (b), enter payments you made after April 15 through June 15, 2006; in column (c), enter payments you made after June 15 through September 15, 2006; and in column (d), enter payments you made after September 15, 2006, through January 15, 2007.

When figuring your payment dates and the amounts to enter on line 19 of each column, apply the following rules.

  • For withheld federal income tax and excess social security or tier 1 railroad retirement tax, you are considered to have paid ¼ of these amounts on each payment due date unless you can show otherwise.

    Caution
    If you treat withholding as paid for estimated tax purposes when it was actually withheld, you must check box D in Part II and complete and attach Form 2210 to your return.

  • Include in your estimated tax payments any overpayment of tax from your 2005 tax return that you elected to apply to your 2006 estimated tax. If you file your return by the due date, treat the overpayment as a payment made on April 15, 2006. Payments made after the due date (not including extensions) are treated as made on the date of payment.

  • If you file your return and pay the tax due by January 31, 2007, include on line 19, column (d), the amount of tax you pay with your tax return. In this case, you will not owe a penalty for the payment due on January 15, 2007.

  • If you paid estimated tax on April 16, 17, or 18, 2006, it is considered paid on April 15, 2006.

  • If you paid estimated tax on January 16, 2007, it is considered paid on January 15, 2007, to the extent it is applied to the fourth required installment.

Line 25

If line 25 is zero for all payment periods, you do not owe a penalty. But if you checked box C or D in Part II, you must file Form 2210 with your return. If you checked box E, you must file page 1 of Form 2210 with your return.

In certain circumstances, the IRS will waive all or part of the underpayment penalty. See Waiver of Penalty on
page 2.

Section B—Figure the Penalty

Caution
Before completing Section B , read the following instructions through line 30, including the six examples.

Figure the penalty by applying the appropriate rate against each underpayment shown on line 25. The penalty is figured for the number of days that the underpayment remained unpaid.

The rates are established at various times throughout the year. For the period covered by the 2006 Form 2210, there were two rates in effect over two rate periods. If an underpayment remained unpaid for more than one rate period, the penalty on that underpayment will be figured using more than one rate.

Use lines 27 and 29 to figure the number of days the underpayment remained unpaid. Use lines 28 and 30 to figure the actual penalty amount by applying the rate to the underpayment for the number of days it remained unpaid.

Your payments are applied first to any underpayment balance on an earlier installment. It does not matter if you designate a payment for a later period. For example, you had a $500 underpayment for the April 15 installment. The June 15 installment required a payment of $1,200. On June 10, you made a payment of $1,200 to cover the June 15 installment. However, $500 of this payment is applied to the April 15 installment. The penalty for the April 15 installment is figured to June 10 (56 days). The amount applied to the June 15 installment is $700.

List your payments after 4/15/06.   Before figuring your penalty in Section B, it will be helpful to list the payments you made after April 15, 2006, as shown in the following tables.

  In each table, list only the payments made during the dates shown in the table heading.
Table 1
Payments after 4/15/06 through 6/30/06
Date Payments
   
   
   
   
Table 2
Payments after 6/30/06 through 4/15/07
Date Payments
   
   
   
   

  When listing your payments, apply the following rules.

  • Any withheld federal income tax and excess social security or tier 1 railroad retirement tax should be included. You are considered to have paid ¼ of these amounts on each payment due date unless you can show otherwise. For example, if you had federal income tax of $4,000 withheld from your wages during the year, list $1,000 as paid on
    6/15/06, 9/15/06, and 1/15/07 in the applicable table. Do not list the withholding attributable to the first payment due date (4/15/06).

  • For Table 2, any balance due of income tax that you pay with your tax return is considered a payment for this purpose and should be listed. Use the date you file your return or 4/15/07, whichever is earlier, as the payment date.

Total days per rate period.   If an underpayment remained unpaid for an entire rate period, use the chart below to determine the number of days to enter in each column. The chart is organized in the same format as Form 2210, Part IV, Section B.
Chart of Total Days
Rate Period (a) 1 (b) 1 (c) 2 (d)
1 (Line 27) 76 15 — —
2 (Line 29) 289 289 212 90
1Do not use columns (a) and (b) if you are eligible for relief through October 16, 2006, due to Hurricane Katrina.
2Use 181 days instead of 212 if you are eligible for relief through October 16, 2006, due to Hurricane Katrina.

  For example, if you have an underpayment on line 25, column (a), but show no payments in Table 1, you would enter “76” on line 27, column (a).

  The following line-by-line instructions apply only to Section B, column (a). If there is an underpayment shown in column (b), (c), or (d) on line 25, complete lines 27 through 30 for those columns in a similar manner.

Rate Period 1

Line 27

Enter on line 27, column (a), the number of days from 4/15/06 to the date of the first payment listed in Table 1. If no payments are listed, enter “76.”

Example 1.

You had an underpayment of $5,000 on line 25 and your first payment shown in the table was made on 4/30/06 in the amount of $3,000. Enter “15” (number of days from 4/15 to 4/30) on line 27, column (a).

Line 28

Make the computation requested on line 28 and enter the result. Note that the computation calls for the “underpayment on line 25.” The amount you use as the “underpayment” depends on whether or not a payment is listed in Table 1. See the instructions and examples beginning on this page and in chapter 4 of Pub. 505.

If there is a payment listed in Table 1.   On a separate sheet of paper, apply the payment to the underpayment shown on line 25. The “underpayment” for the computation on line 28 is the amount of the payment applied to the line 25 underpayment. If the payment is more than the underpayment, apply only an amount equal to the underpayment and use that amount for the line 28 computation.

Example 2.

Assume the same facts as in Example 1. Because you paid $3,000 toward the underpayment, enter $8.63 on line 28 ($3,000 × 15/365 × .07).

Example 3.

Your underpayment on line 25 was $5,000 and you paid $8,000 on 4/30/06. Because your payment was more than your underpayment, you would apply $5,000 to the underpayment. Enter $14.38 on line 28 ($5,000 × 15/365 × .07).

If there are no payments listed in Table 1.   The “underpayment” is the entire underpayment balance, which equals the amount on line 25, column (a).

Determine If You Need To Make Additional Computations for Column (a)

Whether you need to make additional computations depends on which of the following four conditions applies to you.

  1. The first (or only) payment listed in Table 1 was enough to reduce the underpayment to zero. There are no further computations to make for column (a). Figure the penalty for any other underpayments shown in columns (b)-(d) of line 25.

  2. No payments are listed in Table 1. You will need to figure the penalty for the next rate period. See Rate Period 2 on page 5.

  3. The payment listed in Table 1 did not reduce the underpayment to zero, and no other payments are listed. Make one more computation for column (a) on lines 27 and 28. This second computation is to figure the penalty on the underpayment balance; that is, the portion of the underpayment that remained unpaid for the entire period. In this case, you would enter another number in the entry space for lines 27 and 28, as follows.

    1. On line 27, enter “76.” This is the total number of days in the period. See Total days per rate period on page 4.

    2. On line 28, make the computation and enter the result. In this case, however, the “underpayment” in the computation is the remaining balance of the underpayment.

      Example 4.

      Assume the same facts as in Examples 1 and 2. After applying the $3,000 payment, the underpayment balance is $2,000. Line 28, therefore, will contain a second entry of $29.15 ($2,000 × 76/365 × .07).

    3. Go to line 29 to figure the penalty on the underpayment balance for Rate Period 2.

  4. Additional payments are listed in Table 1 and the first payment was not enough to reduce the underpayment to zero. On line 25, you may list the amounts and the payment dates that apply to the underpayment for that installment period. Then figure the penalty for each amount listed on line 25. If an underpayment balance remains after applying all the payments, figure the penalty on the balance of the underpayment for the entire period. See Total days per rate period on page 4.

Example 5.

Your underpayment for column (a) is $5,000 and you made two payments: $3,000 on 4/30/06 and $2,000 on 6/22/06. On line 25, you can enter $5,000 or enter each payment and date separately, which will correspond with the two entries on lines 27 and 28 as explained below.

Line 27 will show two entries in column (a) as follows: “15” days (from 4/15 to
4/30) and “68” days (from 4/15 to 6/22).

Line 28 will show two entries in column (a) as follows: $8.63 ($3,000 × 15/365 × .07) and $26.08 ($2,000 × 68/365 × .07).

Example 6.

Your underpayment on line 25, column (a), is $8,000 and you made two payments: $3,000 on 4/30/06 and $3,000 on 6/22/06. Lines 27 and 28 will each show three entries in column (a), one for each payment and a third for the underpayment balance of $2,000 ($8,000 minus $6,000).

Line 27 will show “15” days (from
4/15 to 4/30), “68” days (from 4/15 to
6/22), and “76” days (from 4/15 to
6/30).

Line 28 will show $8.63, $39.12, and $29.15, computed as follows: $3,000 × 15/365 × .07 (first payment), $3,000 ×
68/365 × .07 (second payment), and $2,000 × 76/365 × .07 (remaining underpayment balance).

Then figure the penalty for Rate Period 2 (lines 29 and 30) on the remaining $2,000 balance.

Rate Period 2

If an underpayment balance remains after applying any payments in Table 1, figure the penalty attributable to that balance on lines 29 and 30. Generally, use the same steps as explained under the instructions for Rate Period 1. But use the dates and interest rate shown on lines 29 and 30 and use only the payments listed in
Table 2.

Line 29

Enter on line 29, column (a), the number of days from 6/30/06 to the date of the first payment listed in Table 2. If no payments are listed in Table 2, enter “289.”

Line 30

Figure line 30 in the same manner as explained for line 28.

Schedule AI—Annualized Income Installment Method

If your income varied during the year because, for example, you operated your business on a seasonal basis, you may be able to lower or eliminate the amount of one or more required installments by using the annualized income installment method. Use Schedule AI to figure the required installments to enter on Form 2210, line 18.

If you use Schedule AI for any payment due date, you must use it for all payment due dates. To figure the amount of each required installment, Schedule AI automatically selects the smaller of the annualized income installment or the regular installment (that has been increased by the amount saved by using the annualized income installment method in figuring any earlier installments).

To use the annualized income installment method, you must do all three of the following.

  1. Enter the amounts from columns (a)-(d) of Schedule AI, line 25, in the corresponding columns of Form 2210, line 18.

  2. Check box C in Part II.

  3. Attach both Form 2210 and Schedule AI to your return.

Additional Information

See Pub. 505 for more details about the annualized income installment method and a completed example. Estates and trusts with short tax years, see Notice 87-32.

Form 1040NR or 1040NR-EZ Filers

If you are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U.S. income tax withholding, the instructions for Schedule AI are modified as follows.

  1. Skip column (a).

  2. Enter on line 1 your income for the period that is effectively connected with a U.S. trade or business.

  3. Increase the amount on line 17 by the amount determined by multiplying your income for the period that is not effectively connected with a U.S. trade or business by the following.

    • In column (b), 72%.

    • In column (c), 45%.

    • In column (d), 30%.

    However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2.4, 1.5, and 1, respectively.

  4. Enter in line 22, column (b), ½ of the amount from Form 2210, Part I,
    line 9. In columns (c) and (d), enter ¼ of that amount.

  5. Skip column (b), lines 20 and 23.

Part I—Annualized Income Installments

Line 1

For each period (column), figure your total income minus your adjustments to income. Include your share of partnership or S corporation income or loss items for the period.

If you are self-employed, be sure to take into account the deduction for one-half of your self-employment tax. To figure this amount for each period, complete Schedule AI, Part II, and divide the amount in columns (a)-(d) on line 34 by 8, 4.8, 3, and 2, respectively.

Line 2

Estates and trusts, do not use the amounts shown in columns (a)-(d). Instead, use 6, 3, 1.71429, and 1.09091, respectively, as the annualization amounts.

Line 6

For each column, multiply line 4 by line 5 and enter the result on line 6. But if line 3 is more than $150,500 ($75,250 if married filing separately), use the worksheet on this page to figure the amount to enter on line 6.

Itemized Deductions Worksheet—Line 6

       
1. Enter the amount from line 4 of Schedule AI 1.  
2. Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2.  
3. Subtract line 2 from line 1 3.  
4. Enter the number given on Schedule AI, line 5 4.  
5. Multiply line 1 by line 4 5.  
  Note.If the amount on line 3 is zero, stop here and enter the amount from line 5 on Schedule AI, line 6.    
6. Multiply line 3 by line 4 6.  
7. Multiply line 6 by 80% (.80) 7.  
8. Enter the amount from Schedule AI, line 3 8.  
9. Enter $150,500 ($75,250 if married filing separately) 9.  
10. Subtract line 9 from line 8 10.  
11. Multiply line 10 by 3% (.03) 11.  
12. Enter the smaller of line 7 or line 11 12.  
13. Divide line 12 by 3.0 13.  
14. Subtract line 13 from line 12 14.  
15. Subtract line 14 from line 5. Enter the result here and on Schedule AI, line 6 15.  

Exemption Worksheet—Line 10

         
1. Multiply $3,300 by the number of exemptions you plan to claim 1.  
2. Enter the amount from Schedule AI, line 3 2.  
3. Enter the amount shown below for your filing status    
  Single—$150,500
Married filing jointly or qualifying widow(er)—$225,750
Married filing separately—$112,875
Head of household—$188,150 		3.  
4. Subtract line 3 from line 2 4.  
5. Is line 4 more than $122,500 (more than $61,250 if married filing separately)?    
 
Box
 Yes. Multiply $1,100 by the number of exemptions you plan to claim and enter the result here and on Schedule AI, line 10. Do not complete the rest of this worksheet.    
 
Box
 No. Divide line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next whole number 5.  
6. Multiply line 5 by 2% (.02). Enter the result as a decimal, but not more than 1.0 6. .
7. Multiply line 1 by the decimal on line 6 7.  
8. Divide line 7 by 1.5 8.  
9. Subtract line 8 from line 1. Enter the result here and on Schedule AI, line 10 9.  

Line 10

For each column, multiply $3,300 by your total exemptions. But if line 3 is more than the amount shown below for your filing status, use the worksheet on page 7 to figure the amount to enter on line 10.

Single $150,500  
Married filing jointly or qualifying widow(er) $225,750  
Married filing separately $112,875  
Head of household $188,150  

Line 12

To compute the tax, use the Tax Table, Tax Computation Worksheet, Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, Foreign Earned Income Tax Worksheet, Schedule J, or Form 8615.

Line 14

Enter all of the other taxes you owed because of events that occurred during the months shown in the column headings. Include the same taxes used to figure Form 2210, line 2 (except self-employment tax), plus the tax from Form 4972, Tax on Lump-Sum Distributions, and any alternative minimum tax (AMT).

To figure the AMT, individuals use Form 6251, Alternative Minimum Tax—Individuals; estates and trusts use Schedule I of Form 1041. Figure alternative minimum taxable income based on your income and deductions during the periods shown in the column headings. Multiply this amount by the annualization amounts shown for each column on Schedule AI, line 2, before subtracting the AMT exemption.

Line 16

For each column, enter the credits you are entitled to because of events that occurred during the months shown in the column headings. These are the credits you used to arrive at the amounts on lines 1 and 3 of Part I, Required Annual Payment. When figuring your credits, annualize any item of income or deduction used to figure each credit. For example, your earned income (and AGI) for the first period (column (a)) is $8,000 and you qualify for the earned income credit (EIC). Use your annualized earned income ($32,000) to figure your EIC for column (a). For details, see Rev. Rul. 79-179, 1979-1 C.B. 436.

Part II—Annualized Self-Employment Tax

If you had net earnings from self-employment during any period, complete Part II for that period to figure your annualized self-employment tax.

If you are married and filing a joint return and both you and your spouse had net earnings from self-employment, complete a separate Part II for each spouse. Enter on line 13 the combined amounts from line 34 of both Parts II.

Line 26

To figure your net earnings from self-employment on line 26, multiply your net profit from all trades or businesses for each period by 92.35% (.9235).

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