Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2020)

What Form 2210 Is For

Form 2210 is the IRS form used to determine whether you owe a penalty for not paying enough estimated tax throughout 2020. 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 filed your return.

The United States has a ""pay-as-you-go"" tax system, meaning you're expected to pay taxes as you earn income—not just at the end of the year. Most employees satisfy this requirement through paycheck withholding, but self-employed individuals, investors, landlords, retirees with pension income, and others need to make quarterly estimated tax payments. If you didn't pay enough throughout 2020, this form calculates the underpayment penalty you might owe.

Here's the good news: you usually don't need to file Form 2210. The IRS will automatically calculate any penalty and send you a bill. However, you must file it in certain situations—such as when you're requesting a waiver of the penalty, using the annualized income method because your income varied throughout the year, or claiming that your withholding wasn't spread evenly across all four quarters.

The form applies to individuals filing Form 1040, 1040-SR, or 1040-NR, as well as estates and trusts filing Form 1041.

When You'd Use Form 2210 (Late/Amended Filing)

Original Returns

Form 2210 is typically filed with your original 2020 tax return if you need to calculate your own penalty or request a waiver. The original deadline for 2020 returns was April 15, 2021 (or March 1, 2021, for qualifying farmers and fishermen).

Amended Returns

If you file an amended return by the due date of your original return (including extensions), the amended return is treated as the original for penalty purposes, and you should use the amended figures to calculate any underpayment. If you amend after the original deadline, you generally use the amounts from your original return to figure the penalty.

Special Filing Situations

There's an important exception for married couples: if you and your spouse file a joint return after the due date to replace previously filed separate returns, use the joint return amounts to calculate your underpayment.

When Filing Is Required

You must attach Form 2210 to your return if you check any of the boxes in Part II (requesting a waiver, using the annualized income method, or claiming uneven withholding). If none of these apply and you simply underpaid, leave the penalty line blank and let the IRS calculate it for you.

If the IRS calculates your penalty and you disagree, you can file Form 2210 later to show why the penalty should be reduced or eliminated—but it's better to address this when you file your original return if you know you'll owe a penalty.

Key Rules for Tax Year 2020

The Basic Safe Harbors

You generally avoid the penalty if your withholding and estimated payments equaled at least the smaller of:

90% of your 2020 tax, or
100% of your 2019 tax (your 2019 return must cover a full 12 months)

Higher-Income Exception

If your 2019 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), you must pay 110% of your 2019 tax (not 100%) to use the prior-year safe harbor.

Absolute Exceptions (No Penalty Ever)

You don't owe a penalty if:

Your 2020 tax liability minus withholding is less than $1,000, or
You had no tax liability in 2019, were a U.S. citizen or resident all year, and your 2019 return covered a full 12 months

Special 2020 COVID-19 Relief

Notice 2020-23 automatically postponed estimated tax payment deadlines that fell between April 1 and July 14, 2020, to July 15, 2020. This effectively combined the first and second quarter payments into one July deadline. Additionally, the CARES Act allowed self-employed individuals to defer 50% of their Social Security tax from self-employment income (March 27 through December 31, 2020), and that deferred portion didn't need to be included in estimated tax calculations. The Families First Coronavirus Relief Act also provided paid sick and family leave credits that could reduce your estimated tax obligations.

Farmers and Fishermen

If at least two-thirds of your gross income came from farming or fishing in 2019 or 2020, you need to pay only 66⅔% of your 2020 tax instead of 90%. Better yet, you avoid the penalty entirely if you file your return and pay all tax owed by March 1, 2021.

Estates and Trusts

Estates are exempt from the penalty for any tax year ending within two years of the decedent's death. The same applies to certain trusts that receive the decedent's estate.

Per-Installment Calculation

The penalty is calculated separately for each quarterly payment due date (April 15, July 15, September 15, and January 15 of the following year). This means you might owe a penalty for an early quarter even if you caught up later or are due a refund overall.

Step-by-Step (High Level)

Step 1: Determine If You Need to File

Use the flowchart at the top of Form 2210, page 1. Most people can skip filing and let the IRS calculate the penalty automatically.

Step 2: Complete Part I — Required Annual Payment (Lines 1-9)

Calculate your ""required annual payment"" by entering your 2020 tax (after credits and refundable credits), then comparing it to 90% of your 2020 tax and 100% (or 110%) of your 2019 tax. The smaller amount becomes your required annual payment.

Step 3: Choose Your Method

Short Method (Part III, Lines 10-17): Available only if you made equal payments on all four due dates or made no estimated payments at all. This is the simplest approach.
Regular Method (Part IV): Use this if your payments were unequal or you made some payments late. You'll calculate underpayments for each payment period separately.
Annualized Income Method (Schedule AI): Use this if your income came unevenly throughout the year (common for seasonal businesses or those with large year-end bonuses). This method can significantly reduce or eliminate your penalty.

Step 4: Calculate Underpayments (If Using Regular Method)

For each payment period, compare your required installment (typically 25% of your annual requirement) to what you actually paid. The difference is your underpayment for that period.

Step 5: Figure the Penalty

Using the penalty worksheet, calculate interest on each underpayment from the due date until it was paid. The IRS publishes quarterly interest rates; for 2020, these rates were historically low due to economic conditions.

Step 6: Request Waivers (If Applicable)

If you qualify for a penalty waiver (retirement after age 62, disability, casualty, disaster, or unusual circumstances), check the appropriate box in Part II and attach a written explanation with supporting documentation.

Step 7: Transfer to Your Tax Return

Enter the penalty amount on the ""Estimated tax penalty"" line of your Form 1040, 1040-SR, 1040-NR, or Form 1041.

Common Mistakes and How to Avoid Them

Mistake #1: Filing When You Don't Need To

Many taxpayers unnecessarily complete Form 2210 when the IRS would calculate the penalty for them. Unless you're requesting a waiver or using a special calculation method, leave the penalty line blank and wait for the IRS to bill you.

Mistake #2: Forgetting COVID-19 Payment Postponements

The April and June 2020 estimated payments were both due on July 15, 2020. If you paid in April or June, you actually paid early—but if you waited until July, you weren't late. Make sure your calculations reflect these postponed deadlines.

Mistake #3: Using the Wrong Prior-Year Safe Harbor

High-income taxpayers (2019 AGI over $150,000/$75,000 MFS) must use 110% of their 2019 tax, not 100%. This is one of the most common calculation errors.

Mistake #4: Not Considering the Annualized Income Method

If your income was lumpy—say, you earned most of your income in the fourth quarter—the standard method will overestimate your penalty. Schedule AI can save you significant money by matching required payments to actual income flow.

Mistake #5: Treating Withholding as Paid Evenly

The standard rule assumes federal tax withheld from wages was paid in equal amounts on each quarterly due date. If your actual withholding was front-loaded or back-loaded (common with bonuses), check box D in Part II and allocate withholding to the actual periods. This can reduce your penalty.

Mistake #6: Forgetting to Request a Waiver

If you retired after age 62, became disabled, or faced a casualty or disaster in 2019 or 2020, you might qualify for a penalty waiver. Attach Form 2210 with a detailed explanation and documentation—don't just pay the penalty without exploring relief options.

Mistake #7: Missing the Federally Declared Disaster Automatic Relief

If you lived in or had a business in a federally declared disaster area (including many areas affected by COVID-19), don't file Form 2210 for a waiver. The IRS automatically applies relief for disaster areas; filing the form could actually delay your relief.

What Happens After You File

If You Don't File Form 2210

The IRS will calculate your penalty using information from your tax return and send you a notice (typically CP2000 or a similar letter) showing the penalty amount. If you file by April 15, 2021, you won't be charged interest on the penalty if you pay the bill by the date shown on the notice.

If You File Form 2210

The penalty amount you calculate will be included in your total tax due. Pay this amount with your return or through a payment plan to avoid additional interest.

Payment Options

You can pay the penalty along with any other tax owed through:

IRS Direct Pay (free online payment from your bank account)
Payment plan (installment agreement if you can't pay in full)
Check or money order mailed with your return
Debit/credit card (convenience fees apply)

Interest Accrual

The IRS charges interest on underpayment penalties. Interest compounds daily using the federal short-term rate plus 3 percentage points. For 2020, rates were relatively low due to economic conditions, but interest continues to accrue until you pay in full.

Penalty Abatement Requests

If the IRS calculates a penalty and sends you a bill, you can request penalty abatement in writing. Explain your circumstances (retirement, disability, casualty, disaster, or reliance on incorrect IRS advice) and provide documentation. The IRS will review your request and respond by mail.

Amended Returns and Adjustments

If the IRS adjusts your return after you file, they'll recalculate your penalty based on the corrected tax amount. You'll receive a new notice showing any additional penalty or refund.

FAQs

Who needs to make estimated tax payments in the first place?

Anyone who expects to owe at least $1,000 in tax after subtracting withholding and credits. This commonly includes self-employed individuals, independent contractors, gig workers, landlords, investors with significant capital gains or dividends, retirees with pension income, and anyone who doesn't have enough tax withheld from their paychecks.

What if I'm due a refund—can I still owe a penalty?

Yes. The penalty is calculated separately for each quarterly due date. Even if you're due a refund when you file, you can owe a penalty if you underpaid during the year. Think of it as a late-payment charge for not spreading your payments evenly across the year.

How much is the underpayment penalty?

It's not technically a penalty—it's interest on money you should have paid earlier. For 2020, the interest rate varied by quarter but was generally 3% annually (compounded daily). The actual amount depends on how much you underpaid and for how long.

Can I avoid the penalty by paying early the next year?

Yes, but only for the fourth quarter. If you file your return and pay all tax owed by February 1, 2021 (instead of the usual April deadline), you won't owe a penalty for the January 15, 2021, installment. This strategy doesn't work for earlier quarters.

What counts as ""reasonable cause"" for a waiver?

The IRS considers reasonable cause to include: retirement after age 62, disability, casualty (fire, theft, natural disaster), federally declared disaster, or other unusual circumstances beyond your control. Financial hardship alone typically doesn't qualify, but combined with other factors it might. You must provide documentation and a written explanation.

Do I need to request a waiver for COVID-19 economic hardship?

Generally, no. If you were in a federally declared disaster area, the IRS automatically applies relief. If you experienced COVID-related income disruption that wasn't covered by automatic relief, you can request a waiver by explaining how the pandemic created unusual circumstances that made it impossible to meet your estimated tax obligations.

What if I disagree with the IRS's penalty calculation?

You have several options: (1) File Form 2210 with your original return showing your own calculation; (2) Respond to the IRS notice in writing explaining why you disagree, with supporting calculations; or (3) Request penalty abatement with documentation. The IRS generally has three years to assess penalties, so if you discover an error later, you can file a claim for refund.

Sources:

This guide provides general information for the 2020 tax year. Tax situations vary, and you should consult IRS publications or a tax professional for specific advice.

Checklist for Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2020)