IRS Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2025)

What Form 2210 Is For

Form 2210 is the IRS document used to determine if you owe a penalty for not paying enough federal income tax throughout the year—either through withholding from your paycheck or by making quarterly estimated tax payments. The United States tax system operates on a "pay-as-you-go" basis, meaning you're expected to pay taxes as you earn income, not just when you file your annual return.

This form calculates the underpayment penalty if you didn't pay at least the minimum required amount by the quarterly due dates. However, here's the good news: most taxpayers don't actually need to file Form 2210. The IRS will automatically calculate any penalty you owe and send you a bill. You only need to file this form in specific situations, such as when you want to use special calculation methods, request a penalty waiver, or your income varied significantly during the year.

Form 2210 serves three main purposes: calculating the exact penalty amount if you choose to include it on your tax return, requesting a waiver or reduction of the penalty under certain circumstances (like casualty, disaster, retirement, or disability), and using the annualized income installment method if your income was uneven throughout the year.

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

When You Must File Form 2210

You're required to file Form 2210 if any of these apply to you:

You're requesting a penalty waiver due to retirement after age 62, disability, casualty, disaster, or unusual circumstances (check Box A or B in Part II)
Your income varied throughout the year and you want to use the annualized income installment method via Schedule AI to reduce or eliminate the penalty (check Box C)
You're claiming withholding was paid unevenly throughout the year rather than in equal quarterly amounts (check Box D)
You're a farmer or fisher meeting certain criteria (check Box E and potentially file Form 2210-F instead)

When You Can File It (Optional)

You may choose to file Form 2210 if you prefer to calculate the penalty yourself and include it with your tax return rather than waiting for the IRS to send you a bill. This gives you control and certainty about the total amount owed.

Amended Returns

If you file an amended return (Form 1040-X) by the original due date of your return, use the amounts from your amended return to calculate any underpayment. If you file an amended return after the due date, use the amounts from your original return. However, there's an important exception: 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 figure your underpayment.

Late Filing Scenarios

The quarterly estimated tax payment deadlines for 2025 are April 15, June 15 (note: June 16 in 2025), September 15, and January 15, 2026. If you file your 2025 tax return and pay all taxes due by January 31, 2026, you won't owe a penalty for the fourth quarter payment period—essentially giving you extra time to avoid penalties if you act quickly.

Key Rules for 2025

The Safe Harbor Thresholds

You can avoid the underpayment penalty if you meet either of these conditions:

The $1,000 rule: Your total tax liability minus withholding is less than $1,000
The 90%/100% rule: You paid at least the smaller of:
- 90% of your 2025 tax liability, OR
- 100% of your 2024 tax liability (your 2024 return must cover a full 12 months)

Special Rules for Higher-Income Taxpayers

If your adjusted gross income (AGI) on your 2024 return exceeded $150,000 ($75,000 if married filing separately), you must pay 110% (not 100%) of your 2024 tax to avoid penalties under the prior-year safe harbor rule.

Special Rules for Farmers and Fishers

If at least two-thirds of your 2024 or 2025 gross income came from farming or fishing, substitute 66⅔% for 90% in the calculation. Qualifying farmers and fishers can avoid penalties entirely by filing their entire return and paying all taxes by March 2, 2026, without making any quarterly estimated payments.

Quarterly Payment Schedule

Estimated tax payments for 2025 are due on these dates:

April 15, 2025 (income earned January 1–March 31)
June 15, 2025 (income earned April 1–May 31)
September 15, 2025 (income earned June 1–August 31)
January 15, 2026 (income earned September 1–December 31)

Penalty Interest Rates

The underpayment penalty rate for 2025 is 7% (as of January 1–June 30, 2025). This rate is set quarterly and may change, so check the IRS website for current rates.

Automatic Exceptions

You won't owe a penalty if you had no tax liability in 2024, were a U.S. citizen or resident for the full year, and your 2024 return covered 12 months. Additionally, estates receive automatic relief for the first two years after the decedent's death.

Step-by-Step (High Level)

Step 1: Determine if You Need to File

Start with the flowchart on page 1 of Form 2210. Calculate whether you meet any of the safe harbor exceptions. If you owe less than $1,000 after withholding, or if you paid enough through the 90%/100% rules, you don't need to file unless you're requesting a waiver.

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

This section calculates your minimum required payment for the year:

Line 1: Enter your total tax from your 2025 return
Line 2: Add back certain taxes (from Schedule 2)
Line 3: Subtract refundable credits
Lines 4-7: Calculate the 90% threshold
Line 8: Calculate 100% or 110% of your 2024 tax (if applicable)
Line 9: Determine the smaller of lines 5 or 8

Step 3: Complete Part II – Reasons for Filing

Check the appropriate box(es) indicating why you're filing:

Box A: Requesting waiver due to casualty, disaster, or unusual circumstances
Box B: Requesting waiver due to retirement (after age 62) or disability
Box C: Using the annualized income installment method
Box D: Claiming uneven withholding
Box E: Farmer/fisher exception

Step 4: Complete Part III – Penalty Computation

This is the most complex section with two sub-parts:

Section A (Lines 10-17): Underpayment by Period

Line 10: Enter required installment for each quarter (typically ¼ of line 9)
Line 11: Enter actual payments made by each deadline
Lines 12-17: Calculate underpayments for each period

Section B (Lines 18-19): Penalty Amount

Use the penalty worksheet to apply the interest rate to each underpayment
Calculate the number of days each underpayment remained unpaid
Multiply the underpayment by the rate and days to get the penalty amount

Step 5: Complete Schedule AI (If Using Annualized Method)

If your income varied significantly during the year (seasonal business, large capital gains late in the year), complete Schedule AI to potentially reduce your penalty. This method allows you to calculate required payments based on actual income earned through each period rather than assuming even income throughout the year.

Step 6: Attach to Your Tax Return

Attach completed Form 2210 to your Form 1040, 1040-SR, 1040-NR, or 1041. Enter the penalty amount on the "Estimated tax penalty" line of your return.

Common Mistakes and How to Avoid Them

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

Many taxpayers file Form 2210 unnecessarily. Unless you're requesting a waiver, using special calculation methods, or want to calculate your own penalty, simply leave the estimated tax penalty line blank and let the IRS figure it for you. They'll send a bill, and if you pay by the date shown, no interest will be charged on the penalty.

Mistake #2: Using the Wrong Prior-Year Tax Amount

When calculating 100% or 110% of your prior-year tax, make sure to exclude refundable credits (earned income credit, additional child tax credit, etc.) from your 2024 tax. These credits reduce what you can use as your safe harbor baseline. High-income taxpayers often forget the 110% rule applies to them.

Mistake #3: Misallocating Estimated Tax Payments

Payments are applied in chronological order to the earliest underpayment first, regardless of which quarter you intended the payment to cover. If you made a $2,000 payment in June but still had a $500 underpayment from April, $500 of your June payment automatically covers the April shortfall first. Understanding this prevents confusion when calculating penalties.

Mistake #4: Incorrectly Treating Withholding

Federal income tax withholding and excess social security/RRTA taxes are generally considered paid equally throughout the year (one-fourth on each quarterly due date) unless you can demonstrate otherwise. If your withholding was actually uneven—perhaps you started a job mid-year or received a large bonus—you must check Box D in Part II and provide documentation.

Mistake #5: Forgetting About Overpayments from Prior Year

If you had an overpayment on your 2024 return that you applied to 2025 estimated taxes, this counts as a payment. It's generally treated as paid on April 15, 2025, unless your 2024 return was filed and fully paid before that date.

Mistake #6: Not Considering the Annualized Income Method

If you had uneven income (common for business owners, commission earners, or investors with large year-end capital gains), the annualized income installment method via Schedule AI could significantly reduce or eliminate your penalty. Many taxpayers miss this opportunity to reduce penalties legitimately.

Mistake #7: Requesting Waivers Without Proper Documentation

When requesting a penalty waiver for retirement, disability, casualty, or disaster, you must attach supporting documentation: proof of retirement date and age, disability documentation, police reports, insurance claims, etc. Requests without adequate documentation are typically denied.

What Happens After You File

If You Don't File Form 2210

The IRS will calculate any underpayment penalty and send you a notice (typically Notice CP2000 or a similar document). The notice will show the penalty amount and payment instructions. If you filed your 2025 return by April 15, 2026, and pay the penalty by the date on the bill, no additional interest will be charged on the penalty itself.

If You File Form 2210 with Your Return

The penalty you calculated will be included in your total amount due or will reduce your refund. The amount is paid when you file your return or through your established payment plan. This approach gives you certainty about your total tax liability upfront.

If You Requested a Waiver

The IRS will review your request and supporting documentation. This review process can take several weeks or months. If approved, the penalty will be removed or reduced, and you'll receive a notice explaining the adjustment. If denied, you'll receive a bill for the full penalty amount plus any accrued interest.

If You Used the Annualized Income Method

The IRS will review your Schedule AI calculations during return processing. If they accept your calculations, the reduced penalty (or no penalty) will stand. If they find errors, they'll send you a notice with the corrected penalty amount and an explanation.

Federally Declared Disaster Relief

If you lived in or had a business in a federally declared disaster area, the IRS automatically identifies affected taxpayers and applies appropriate penalty relief. You typically don't need to file Form 2210 in these cases unless using the annualized income method could further reduce your penalty.

Appealing a Penalty

If you disagree with the IRS's penalty calculation, you can request an appeal. You must provide a written explanation signed under penalty of perjury and mail it to the address on your notice within the specified timeframe (usually 30-60 days).

Setting Up a Payment Plan

If you can't pay the penalty in full immediately, you can set up an IRS payment plan online through your IRS account. While payment plans don't eliminate penalties, they prevent additional collection actions and may reduce some late-payment penalties going forward.

FAQs

Can I avoid the penalty by increasing withholding at year-end instead of making quarterly estimated payments?

Who should consider filing Form 2210 even when it's optional?

What's the difference between the "regular method" and the "annualized income installment method"?

If I'm self-employed and have variable income, how do I calculate estimated taxes?

Can the underpayment penalty be waived for reasonable cause?

Do I need to file separate Forms 2210 if my spouse and I file separately but were married?

What happens if I made all my estimated payments but still owe a penalty?

Important Resources

This summary is based on official IRS guidance as of the 2025 tax year. Tax laws and forms are subject to change. For personalized advice, consult a qualified tax professional.

Checklist for IRS Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2025)