Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2017)

What Form 2210 Is For

Form 2210 is the IRS form that calculates whether you owe a penalty for not paying enough estimated taxes throughout 2017. Think of it as the IRS's way of checking if you paid your taxes on time during the year, rather than all at once when you file your return.

The U.S. tax system is "pay as you go"—meaning the government expects you to pay taxes as you earn income throughout the year. For most employees, this happens automatically through paycheck withholding. But if you're self-employed, have investment income, rental income, or other non-wage income, you're generally required to make quarterly estimated tax payments.

Form 2210 determines if you fell short of these payment requirements and calculates the penalty amount. The penalty functions like interest charges on money you should have paid earlier. Importantly, most taxpayers don't need to file this form—the IRS will calculate any penalty automatically and send you a bill. You only need to file Form 2210 in specific situations, such as when requesting a penalty waiver or using special calculation methods.

When You'd Use Form 2210

Late/Amended Situations

You'll encounter Form 2210 in several scenarios:

Original Return Filing: If you owe more than $1,000 in tax after subtracting withholding and credits, you may need to address underpayment penalties when filing your original 2017 return (due April 17, 2018, or October 15, 2018, with an extension).

Amended Returns: If you file an amended return by your original return's due date, use the amended figures to calculate any underpayment. However, if you amend after the due date, the penalty calculation uses your original return amounts. One exception: if you and your spouse file a joint return after the due date to replace previously filed separate returns, use the joint return figures.

Special filing situations where you must attach Form 2210:

Box B: You're requesting a partial penalty waiver and need to calculate which portion should be waived
Box C: Your income varied throughout the year and you're using the annualized income installment method to reduce or eliminate the penalty
Box D: You want to treat your federal tax withholding as paid on the actual dates withheld (rather than in equal quarterly amounts) to lower your penalty

When you don't file it: If none of the above special situations apply and you simply underpaid, don't file Form 2210—the IRS will automatically calculate the penalty and send you Notice CP2000 or a similar bill. You'll have no interest charges on the penalty if you pay by the notice deadline.

Key Rules for 2017

The Safe Harbor Rules:

You avoid the underpayment penalty if your withholding and estimated tax payments equal at least the smaller of:

90% of your 2017 tax liability, OR
100% of your 2016 tax liability (your 2016 return must cover a full 12 months)

Important modification: If your adjusted gross income (AGI) on your 2016 return exceeded $150,000 ($75,000 if married filing separately), the second option increases to 110% of your 2016 tax.

Automatic Exceptions (No Penalty, No Form):

You don't owe any penalty and don't need to file Form 2210 if:

Your total 2017 tax minus withholding is less than $1,000
You had no tax liability for 2016, were a U.S. citizen or resident alien all year, and your 2016 return covered 12 months

Special Rules for Farmers and Fishermen:

If at least two-thirds of your 2016 or 2017 gross income came from farming or fishing, you're subject to different rules: you need only pay 66⅔% of current year tax and can file by March 1, 2018, without quarterly payments. Use Form 2210-F instead of Form 2210.

The Four Payment Due Dates:

Estimated taxes for 2017 were due:

April 18, 2017 (1st quarter)
June 15, 2017 (2nd quarter)
September 15, 2017 (3rd quarter)
January 16, 2018 (4th quarter)

Early Payment Option: If you filed your complete return and paid all taxes owed by January 31, 2018, you automatically avoid the penalty for the January 16, 2018, payment.

Penalty Calculation:

The penalty is calculated separately for each quarterly period and functions like interest at a rate set by the IRS (4% annual rate for 2017). The penalty accrues from the due date of each installment until it's paid.

Step-by-Step (High Level)

Step 1: Determine If You Need to File

Follow the flowchart on Form 2210, page 1:

Calculate your total 2017 tax (lines 1-4)
Determine if you owe less than $1,000 after withholding (line 7)—if yes, stop; no penalty
Compare your withholding to your required annual payment (lines 8-9)
Determine if any special circumstances in Part II apply

Step 2: Choose Your Calculation Method

Three methods exist:

Short Method (Part III): Use this if you:

Made no estimated payments (only had withholding), OR
Paid the exact same amount on all four quarterly due dates
Made no late payments

This is the simplest approach—just five calculations to determine your total underpayment and apply a simplified penalty factor (multiply underpayment by 0.02660, then adjust for early payment if applicable).

Regular Method (Part IV): Use this if:

You made varying payment amounts
You made some payments late
You don't qualify for the short method or annualized income method

This method requires calculating underpayments for each quarter separately, then computing daily interest charges using the penalty worksheet for each period an underpayment remained outstanding.

Annualized Income Installment Method (Schedule AI): Use this if:

Your income varied significantly during the year (seasonal business, large year-end capital gain, etc.)
You want to pay based on actual income earned through each quarter rather than equal amounts

This most complex method can substantially reduce or eliminate penalties if your income was "back-loaded" into later quarters.

Step 3: Complete the Relevant Parts

Part I (Required Annual Payment): Everyone completes this to determine baseline requirements
Part II (Reasons for Filing): Check applicable boxes—this determines whether you must attach the form
Part III or IV: Complete the appropriate calculation method
Schedule AI: Complete only if using the annualized income method

Step 4: Transfer the Penalty Amount

Enter your calculated penalty on:

Line 17 (short method) or line 27 (regular method) of Form 2210
The "Estimated tax penalty" line of your tax return (Form 1040, line 79)

Step 5: Determine What to Submit

If you checked only box A or E: File only page 1 of Form 2210
If you checked box B, C, or D: File complete Form 2210 with all calculations
If no boxes checked and you owe less than $1,000: Don't file Form 2210 at all

Common Mistakes and How to Avoid Them

Mistake #1: Not Including All Taxes

Many taxpayers forget to include Additional Medicare Tax (0.9% on high earners) and Net Investment Income Tax (3.8% surtax) when calculating their required payment. These taxes, introduced in recent years, must be factored into line 2 of Form 2210.

How to avoid: Carefully review the line 2 instructions and include Forms 8959 and 8960 amounts if applicable.

Mistake #2: Misapplying the High-Income Safe Harbor

Taxpayers with 2016 AGI over $150,000 ($75,000 if married filing separately) must use 110% of prior year tax but often incorrectly use 100%.

How to avoid: Check your 2016 AGI before completing line 8. If you exceed the threshold, multiply your 2016 tax by 1.10.

Mistake #3: Incorrect Withholding Allocation

The IRS assumes your federal withholding was spread evenly across all four quarters (25% each) unless you prove otherwise. If you actually had uneven withholding (changed jobs, bonus withholding, etc.), the default allocation might increase your penalty.

How to avoid: If your withholding was uneven and it matters, check box D in Part II and use the regular method to allocate withholding to actual dates. Be prepared to document withholding dates from your pay stubs.

Mistake #4: Improper Payment Application Order

The IRS automatically applies payments to earlier period underpayments first, regardless of how you labeled them. For example, if you made your June payment but missed April, part of the June payment covers the April shortfall.

How to avoid: Understand that you can't "skip" a quarter. Complete the penalty worksheet carefully, following instructions for applying payments chronologically.

Mistake #5: Forgetting About Prior Year Overpayment

If you overpaid 2016 taxes and elected to apply the refund to 2017 estimated taxes, this counts as a payment made April 18, 2017—but many forget to include it on line 19, column (a).

How to avoid: Review your 2016 return. If you checked the box to apply your refund to 2017 estimated tax, include that amount in your Form 2210 calculations.

Mistake #6: Not Requesting Available Waivers

The IRS waives penalties for reasonable cause, including retirement after age 62, disability, casualty, disaster, or unusual circumstances—but only if you request it.

How to avoid: If any qualifying circumstance applies, check box A or B in Part II and attach a detailed explanation with supporting documentation (retirement account statements, insurance claims, medical records, etc.).

Mistake #7: Filing When Not Required

Many taxpayers unnecessarily file Form 2210 when the IRS would calculate the penalty automatically. This wastes time and risks calculation errors.

How to avoid: Only attach Form 2210 if you checked box B, C, or D in Part II. Otherwise, let the IRS calculate the penalty and simply pay the bill when it arrives.

Mistake #8: Using the Wrong Method

Taxpayers sometimes use the short method when they made late payments or the regular method when annualized income would eliminate the penalty entirely.

How to avoid: Review the method eligibility requirements carefully. If your income was uneven (seasonal work, capital gains, etc.), investigate whether Schedule AI could save you money.

What Happens After You File

If You Don't Attach Form 2210:

The IRS will calculate your underpayment penalty using their automated systems. Within several weeks to several months after processing your return, you'll receive a notice (typically CP2000 or similar) showing:

The calculated penalty amount
Applicable interest rates and periods
Payment instructions
A deadline for payment (usually 21-30 days)

Important: If you filed by April 17, 2018, and pay the penalty by the notice deadline, no interest accrues on the penalty itself. This is a significant benefit—the penalty doesn't compound.

If You Attached Form 2210:

The IRS will review your calculations. They may:

Accept your calculation and assess the penalty amount you computed
Adjust your calculation if they identify errors and send a notice explaining differences
Contact you for additional documentation (particularly if you requested a waiver)

Waiver Requests:

If you checked box A or B requesting a waiver, expect:

Longer processing time (typically 8-12 weeks)
Possible requests for additional documentation
A formal determination letter approving or denying the waiver (or partial waiver)
If approved: no penalty or reduced penalty assessed
If denied: full penalty assessed with payment instructions

For Annualized Income Method (Box C):

The IRS will verify your Schedule AI calculations. They may:

Recalculate using your income figures
Request documentation supporting the income timing you reported
Adjust the penalty if they find computational errors

Payment Options:

Once the penalty is finalized, you can:

Pay immediately online at IRS.gov/payments
Mail a check with the notice payment stub
Request a payment plan if you can't pay in full
Qualify for currently not collectible status if facing financial hardship

Record Keeping:

Keep all related documents for at least three years:

Your completed Form 2210 and worksheets
Estimated tax payment records and canceled checks
Withholding documentation (W-2s, 1099s)
Any correspondence regarding waivers
Notices received from the IRS

Impact on Future Years:

An underpayment penalty for 2017 doesn't affect your 2018 taxes, but serves as a warning. To avoid repeating the situation:

Increase withholding on Form W-4
Make larger or more timely estimated payments
Consider the safe harbor rules when planning payments
If income remains variable, plan to use the annualized method again

FAQs

1. I owe a small penalty—can I just ignore it?

No. The IRS will continue adding interest and may eventually take collection action (levy, lien, offset future refunds). Even small penalties grow over time. Pay it when you receive the notice to avoid escalation.

2. Can I include the penalty with my tax return payment even if I didn't calculate it?

You can, but you're guessing at the amount. It's better to wait for the IRS calculation unless you checked box B, C, or D and must file Form 2210. If you underpay the penalty, the IRS will bill you for the difference plus interest. If you overpay, you'll eventually get a refund, but it may take months.

3. I had major medical expenses and couldn't afford estimated payments—will the IRS waive my penalty?

Possibly. Financial hardship alone isn't typically grounds for waiver, but if the medical situation constitutes a casualty or "unusual circumstance," you may qualify. Check box B, attach Form 2210, and provide detailed documentation: medical records, insurance claims, financial statements showing the impact. The IRS evaluates waiver requests case-by-case.

4. I received a large year-end bonus and now I owe an underpayment penalty—is there anything I can do?

Yes! This is exactly when the annualized income installment method (Schedule AI) helps. If your income was much higher in the fourth quarter than earlier quarters, Schedule AI calculates required payments based on actual income earned through each period. This often reduces or eliminates the penalty. You'll need to check box C and complete Schedule AI, but it may save hundreds or thousands of dollars.

5. I made all four estimated payments on time but still got a penalty notice—why?

Several possibilities: (a) Your payments were large enough to meet the 90% of 2017 tax or 100%/110% of 2016 tax safe harbor, (b) You underpaid one or more quarters even though you made four payments, (c) You made payments late (even by a few days), or (d) The IRS miscalculated. Review the notice carefully against your payment records. If you believe the IRS erred, call the number on the notice or file Form 843 (Claim for Refund) with documentation.

6. Can I adjust my withholding late in the year to avoid the penalty?

Partially. Increasing withholding late in the year helps because the IRS treats withholding as paid evenly throughout the year, even if actually withheld in December. However, estimated payments are credited only when made. So if you underpaid early quarters, increasing year-end withholding can reduce (but may not eliminate) the penalty for those periods. This strategy works better than making a large fourth-quarter estimated payment.

7. I'm filing late (after April 2018)—do I still need to worry about Form 2210?

Yes, if applicable. The underpayment penalty still applies even if you file late, and it's separate from the late-filing and late-payment penalties. However, if you're filing late and don't check box B, C, or D, let the IRS calculate the underpayment penalty—you'll have enough to deal with regarding the late-filing penalty (5% per month, up to 25%) and late-payment penalty (0.5% per month).

Source Information:

All information in this guide is based on official IRS publications:

For additional assistance, consult IRS Publication 505 (Tax Withholding and Estimated Tax) or speak with a qualified tax professional.

Disclaimer

Disclaimer: This guide provides general information only and does not constitute tax advice. Tax situations vary by individual circumstances. Consult with a qualified tax professional for advice specific to your situation.

Checklist for Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2017)