Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2013)

What the Form Is For

Form 2210 is the IRS document used to determine whether you owe a penalty for not paying enough estimated tax throughout 2013, and if so, to calculate the exact penalty amount. The federal tax system operates on a pay-as-you-go basis, meaning taxpayers must pay taxes as they earn income during the year—either through withholding from paychecks or quarterly estimated tax payments. When you underpay these amounts, the IRS may assess an underpayment penalty, essentially interest charges for paying your taxes later than required.

The form serves two primary purposes: first, it helps you determine if you've met the minimum payment thresholds to avoid penalties, and second, it provides the framework for calculating penalties when you haven't. The IRS typically figures this penalty automatically if you simply file your return, but Form 2210 allows you to calculate it yourself, which may be advantageous if your income varied throughout the year or you qualify for certain penalty reductions or waivers.
IRS Form 2210

The penalty is calculated separately for each quarterly installment due date (April 15, June 15, September 15, and January 15), meaning you could owe penalties for early quarters even if you caught up later or are due a refund when filing your return.

When You’d Use It (Late/Amended Filing)

Most taxpayers don't need to file Form 2210 with their original return unless specific circumstances apply. If you simply underpaid estimated taxes but meet none of the special conditions listed in Part II of the form, the IRS will automatically calculate your penalty and send you a bill—you don't need to submit Form 2210. If you file your 2013 return by April 15, 2014, no interest will be charged on this penalty if you pay by the date shown on the IRS bill.

However, you must file Form 2210 if you check boxes B, C, or D in Part II, which occur when: your income varied significantly during the year and you're using the annualized income installment method to reduce penalties; you're treating federal tax withholding as paid on actual withholding dates rather than equally throughout the year; or you're requesting a partial penalty waiver. You must also file page 1 if you're requesting a complete penalty waiver (box A) or if you filed joint for one year but not both 2012 and 2013 (box E).

For amended returns filed by the original return's due date (including extensions), the amended return is considered the original for penalty calculation purposes. If you file an amended return after the due date, you use the original return amounts to figure underpayment. The exception is when spouses file a joint return after the due date to replace previously filed separate returns—in this case, the joint return amounts are used.

Key Rules for 2013

Major 2013 Tax Changes Affecting Form 2210

2013 brought significant tax changes that directly affected Form 2210 calculations. The top individual tax rate increased to 39.6%, the first time since 2001. Two new taxes were introduced: Additional Medicare Tax (0.9% on wages and self-employment income above threshold amounts) and Net Investment Income Tax (3.8% on net investment income for higher earners). The personal exemption increased to $3,900 but began phasing out for taxpayers with adjusted gross incomes above certain levels. Medical expense deductions became more restrictive, with expenses only deductible if exceeding 10% of AGI (7.5% if either spouse was born before January 2, 1949), and itemized deductions began phasing out for taxpayers with AGI above $150,000.

Safe Harbor & Minimum Payment Rules

The general rule for avoiding penalties: Your total withholding and timely estimated tax payments must equal at least the smaller of either:

• 90% of your 2013 tax, or
• 100% of your 2012 tax (if your 2012 return covered a full 12 months).

Higher-income taxpayers face a stricter requirement—if your 2012 adjusted gross income exceeded $150,000 ($75,000 if married filing separately in 2013), you must pay 110% of your 2012 tax.

Automatic Exceptions

You are automatically excused from penalties if:

• You had no tax liability for 2012, were a U.S. citizen or resident alien all year, and your 2012 return covered 12 months; or
• Your 2013 tax minus withholding is under $1,000.

Farmers and fishermen (with at least two-thirds of gross income from these activities) use Form 2210-F instead.

Step-by-Step Process (High Level)

Step 1: Determine If You Owe a Penalty

Complete lines 1–7 of Part I to calculate your current year tax.
If line 7 (current year tax minus withholding) is under $1,000 → no penalty.

If not, continue to lines 8–9 to compare required annual payment with withholding.

Step 2: Check If Filing Is Required

Review Part II for applicable boxes.

• If none apply and your withholding (line 6) exceeds required annual payment (line 9), you don’t owe a penalty or need to file Form 2210.
• If you owe a penalty but no Part II boxes apply, you still don’t file—IRS calculates it.

Step 3: Choose Your Calculation Method

You may choose:

• Short Method (Part III) — only if:
  • You made no estimated payments, or
  • You made identical timely payments on all four due dates.
• Regular Method (Part IV) — required if:
  • Payments varied,
  • Payments were late,
  • You use the annualized income method (Schedule AI).

Step 4: Calculate the Penalty

• The short method uses a simplified formula with a 3% interest rate for 2013.
• The regular method computes penalties per-quarter, using the Penalty Worksheet and tracking underpayments across rate periods.

Step 5: Complete and Attach

Enter your penalty on:

• Form 1040 line 77
• Form 1040A line 46
• Form 1040NR line 74
• Form 1040NR-EZ line 26
• Form 1041 line 26

Attach Form 2210 only if you checked a Part II box.

Common Mistakes and How to Avoid Them

Mistake 1: Filing Unnecessarily

Unless a Part II box applies, the IRS will calculate the penalty for you. Filing anyway adds unnecessary work.

Mistake 2: Using the Wrong Prior-Year Figure

Use your total 2012 tax liability—not just income tax on line 55.
Higher-income taxpayers often miss the 110% requirement.

Mistake 3: Treating Withholding Incorrectly

Withholding is treated as paid equally each quarter, unless you elect actual withholding dates (requires checking box D and filing Form 2210).

Mistake 4: Misunderstanding Payment Application Order

Payments apply to the earliest underpayment first.
A June payment may first cover an April underpayment.

Mistake 5: Not Considering the Annualized Method

If income was late-year heavy (bonuses, seasonal income, investment gains), Schedule AI may reduce penalties—but once used, it must be used for all periods and Form 2210 must be filed.

Mistake 6: Forgetting 2013 Tax Law Changes

New taxes (Additional Medicare Tax, NIIT) increased 2013 liabilities, surprising many taxpayers.

What Happens After You File

IRS Review of Your Calculation

If you calculated your own penalty on Form 2210, the IRS verifies your math.
If errors exist, they adjust the penalty and send a notice.

If You Didn’t File Form 2210

The IRS:

• Automatically calculates the penalty
• Sends a CP-14 bill with amount due and payment deadline

No interest accrues on the penalty if paid by the notice deadline.

Penalty Waiver Requests

If you requested a waiver (box A or B):

• IRS reviews your documentation
• Waivers may be approved for disability, retirement after age 62, casualty, disaster, or unusual circumstances
• Disaster-area taxpayers often receive automatic relief without filing Form 2210

Paying the Penalty

Payment options include:

• Check or money order
• Online payments
• Installment agreements

Interest begins accruing on unpaid penalty amounts after the due date on the notice.

FAQs

Can I avoid the penalty by paying my entire tax liability when I file my return?

Not necessarily. The penalty is based on when taxes should have been paid during the year.
Exception: If you file and pay by January 31, 2014, you avoid the January 15 installment penalty.

If I'm getting a refund, can I still owe an underpayment penalty?

Yes. Refunds reflect total year-end overpayment, but penalties reflect quarterly underpayment patterns.

How does the higher-income exception work if I file jointly in 2013 but didn't in 2012?

Special rules apply:

• If filing jointly in 2013 after filing separately in 2012 → add both spouses’ 2012 taxes.
• If filing separately in 2013 after filing jointly in 2012 → see Pub. 505, Chapter 4.

Check box E and file page 1 of Form 2210.

What's the penalty interest rate for 2013?

The annual underpayment rate is 3%, constant throughout the relevant 2013 penalty periods.

Can I make estimated tax payments for 2013 after the tax year ends?

Yes, but:

• Payments made after Jan. 15, 2014 but by filing day apply to Q4 only
• They do not erase earlier-quarter penalties

Does the Additional Medicare Tax and Net Investment Income Tax affect my required payments?

Yes. Both increase your total tax liability and therefore the amounts required to hit safe harbor thresholds.

What happens if I miss checking a required box in Part II but file Form 2210 anyway?

The IRS will still process your form. Missing a required box may cause them to recalculate the penalty using their method, possibly increasing it.