Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2018)
What Form 2210 Is For
Form 2210 is the IRS form used to determine whether you owe a penalty for not paying enough taxes throughout 2018. The U.S. tax system operates on a ""pay-as-you-go"" basis, meaning you're expected to pay taxes as you earn income rather than all at once when you file your return. If you didn't have enough federal income tax withheld from your paycheck or didn't make sufficient estimated tax payments during the year, Form 2210 calculates the penalty you may owe.
This form applies to individuals (filing Forms 1040, 1040NR, or 1040NR-EZ), estates, and trusts (filing Form 1041). The penalty isn't just a flat fee—it's calculated based on interest rates and how long your tax was underpaid, treating each quarterly payment period separately. Importantly, you might owe a penalty even if you're getting a refund when you file, because the penalty looks at whether you paid enough throughout the year, not just your final tax bill.
When You’d Use Form 2210 (Late/Amended)
Most taxpayers never need to file Form 2210 at all. The IRS typically calculates any penalty automatically and sends you a bill, which means you can simply pay it when invoiced without dealing with the form yourself. However, you must file Form 2210 in specific situations: when requesting a penalty waiver (checking boxes A or B in Part II), when your income varied during the year and you're using the annualized income installment method (box C), when you want to treat withholding as paid on actual dates rather than equally throughout the year (box D), or when filing joint returns for only one of the two years being compared (box E).
If you file an amended return by your original return's due date, you'll use the amended return figures. If you amend after the due date, however, you'll use your original return numbers for the penalty calculation. One special exception: if you and your spouse file a joint return after the due date to replace previously filed separate returns, you can use the joint return amounts.
Key Rules and Details for 2018
The year 2018 had special significance because it was the first tax year under the Tax Cuts and Jobs Act (TCJA), which brought sweeping changes to the tax code. Recognizing that many taxpayers struggled to accurately calculate their 2018 withholding and estimated payments due to these sudden changes, the IRS created a special ""80% waiver"" unique to 2018. Normally, you avoid the underpayment penalty if your total withholding and estimated payments equal at least 90% of your current year's tax or 100% of your prior year's tax (whichever is smaller). For 2018 only, the IRS lowered the threshold to 80% of your current year's tax, as long as those payments were made by January 15, 2019.
Higher-income taxpayers faced stricter requirements: if your 2017 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), you needed to pay 110% of your 2017 tax liability, not just 100%. Farmers and fishermen had different rules entirely—if at least two-thirds of their gross income came from farming or fishing, they could substitute 66⅔% for the 90% threshold.
You're automatically exempt from the penalty if your total tax minus withholding is under $1,000, if you had zero tax liability in 2017 (and were a U.S. citizen/resident for the full year with a 12-month return), or if you're filing for a decedent's estate within two years of death. For taxpayers affected by federally declared disasters, the IRS automatically identifies and applies penalty relief.
Step-by-Step (High Level)
First, complete Part I (lines 1-9) to determine your required annual payment. This involves calculating your current year tax, comparing it to 90% of that amount, and comparing it to 100% (or 110% for high earners) of your prior year's tax. The smaller of these becomes your required annual payment.
Next, follow the flowchart on Form 2210's first page. If the tax you owe (minus withholding) is under $1,000, stop—you don't owe a penalty. If your withholding alone meets or exceeds your required annual payment, you're also clear. Most taxpayers who might owe a penalty can stop here and let the IRS calculate it.
If you must file the form, determine which method to use. The Short Method (Part III) works if you made no estimated payments (or only had withholding) or paid equal amounts on all four quarterly due dates. This simple calculation multiplies your total underpayment by 3.603% and adjusts if you paid before April 15, 2019.
The Regular Method (Part IV) is required if you made late payments, if you're claiming certain waivers, or if you're using special calculations. This method requires figuring underpayments for each quarterly period separately (April 15, June 15, September 15, and January 15), then using a penalty worksheet to calculate interest-based penalties for each period.
The Annualized Income Installment Method (Schedule AI) benefits taxpayers whose income was uneven throughout the year—such as those who received large bonuses, sold property, or had seasonal business income. This complex schedule recalculates required installments based on actual income earned in each period, potentially reducing or eliminating penalties.
Common Mistakes and How to Avoid Them
Mistake 1: Filing When You Don't Need To
Mistake 1: Filing when you don't need to. Many taxpayers unnecessarily complete Form 2210 when the IRS would calculate their penalty automatically. Unless you're requesting a waiver or using special calculation methods (boxes A-E in Part II), let the IRS do the work and simply pay the bill when it arrives.
Mistake 2: Not Claiming the 2018-Specific 80% Waiver
Mistake 2: Not claiming the 2018-specific 80% waiver. This special relief was unique to 2018 and could save substantial penalty amounts, but you had to explicitly request it by checking box A in Part II and writing ""80% Waiver"" next to it. Complete the 80% Exception Worksheet in the instructions to verify eligibility before claiming this waiver.
Mistake 3: Treating Withholding Incorrectly
Mistake 3: Treating withholding incorrectly. The default assumption is that federal income tax withholding happened evenly throughout the year (one-fourth per quarter). If you actually received most withholding later in the year—say, from a bonus or new job—you can check box D and prove the actual withholding dates, potentially reducing your penalty. However, most taxpayers miss this opportunity.
Mistake 4: Not Using the Annualized Income Method
Mistake 4: Not using the annualized income method. If your income was heavily weighted toward the end of 2018—perhaps from investment gains, property sales, or business seasonality—the annualized method could dramatically reduce or eliminate your penalty. While Schedule AI is complex, it's worth the effort for taxpayers with significant income timing variations.
Mistake 5: Missing the Section 965 Exclusion
Mistake 5: Missing the Section 965 exclusion. Taxpayers with deferred foreign income under Section 965 (often from tax reform's repatriation provisions) could exclude those amounts when calculating required payments. The instructions provide specific guidance for refiguring your tax without these amounts.
What Happens After You File
If you filed Form 2210 with your tax return and calculated your own penalty, that amount appears on the ""Estimated tax penalty"" line of your return (Form 1040, line 23; Form 1040NR, line 76; Form 1040NR-EZ, line 26; or Form 1041, line 27). You'll either pay that penalty with your return or it reduces any refund you're owed.
If you qualified for the 80% waiver or another waiver and properly claimed it, the IRS processes your return without assessing the penalty. If you already paid an estimated tax penalty before discovering you qualified for the 80% waiver, you could file Form 843 (Claim for Refund and Request for Abatement) with ""80% Waiver of estimated tax penalty"" written on line 7 to recover that payment.
For those who let the IRS calculate the penalty, you'll receive a notice (typically a CP14 or similar) showing the penalty amount due. If you filed by April 15, 2019, the IRS won't charge interest on the penalty itself if you pay by the date on the bill—though you'll still owe interest on any underlying tax debt.
If you requested a casualty, disaster, or reasonable cause waiver by checking boxes A or B and attaching explanatory statements, the IRS reviews your documentation and sends a determination letter. This process can take several months. For federally declared disaster areas, relief is automatic based on your address, and you don't need to file Form 2210.
FAQs
1. Does everyone who owes tax when they file owe this penalty?
No—only if you owe $1,000 or more after subtracting withholding from your total tax, and you didn't meet the safe harbor requirements (90% of current year or 100%/110% of prior year tax paid throughout the year).
2. What were the four quarterly payment due dates for 2018?
April 17, 2018; June 15, 2018; September 17, 2018; and January 15, 2019 (some dates adjusted for weekends/holidays).
3. Can I avoid the penalty by paying my full tax bill by the return due date?
No—the penalty looks at whether you paid enough throughout the year, not whether you eventually paid everything. The pay-as-you-go system requires timely quarterly payments.
4. What made 2018 different from other years?
The Tax Cuts and Jobs Act dramatically changed tax brackets, deductions, and credits starting in 2018, making it difficult for taxpayers to estimate their withholding correctly. The IRS responded with special 80% relief (lowered from the usual 90%) for this transition year.
5. How much is the penalty?
The penalty varies based on underpayment amount, timing, and federal short-term interest rates. For 2018, the effective annual rate was about 5% (the instructions show a factor of 0.03603 for the short method), but actual penalties depend on how long each quarterly underpayment persisted.
6. If my income comes mostly at year-end, can I make one large payment in January instead of four quarterly payments?
Not without potential penalty—unless you use Schedule AI to prove your income was actually earned late in the year. Otherwise, the IRS expects payments throughout the year based on standard installment rules.
7. Are there different rules for farmers, fishermen, and high-income taxpayers?
Yes—farmers and fishermen with 66⅔% agricultural income use Form 2210-F and can pay their entire estimated tax by January 15, 2019. High earners (2017 AGI over $150,000/$75,000) must pay 110% of prior year tax, not 100%, to use that safe harbor.
Source: IRS Form 2210 Instructions (2018), IRS Form 2210 (2018), IRS Newsroom - 80% Waiver Announcement
