What this notice is about
We assessed a penalty for failure to make sufficient timely estimated tax payments because our records show you didn't prepay enough of your tax through estimated tax payments or didn't make them on time.
Corporations generally must make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
What you need to do
- Read your notice carefully. It will explain how much you owe and how to pay it.
- Pay the amount you owe by the due date on the notice.
- If you receive income unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments. Use Form 2220, Underpayment of Estimated Tax by Corporations.
You may want to
Review Form 2220 to see if any of the exceptions for computing the penalty apply to you. If any of the exceptions apply, you may be able to lower or avoid the penalty by following the instructions for the given exception.
Note: Estates and most trusts review Form 2210.
Frequently asked questions
How do I have the penalty adjusted?
We may reduce or remove the penalty if any of the following apply:
- The corporation owed less than $500.
- You can supply cancelled checks or other documentation to show the amount and date you made estimated tax payments.
- The corporation is a member of a consolidated group figuring its first required installment based on prior year’s tax.
If I have reasonable cause, can you remove or reduce the penalty?
We can't remove or reduce the penalty for reasonable cause. However, we can remove or reduce it to the extent it's directly attributable to erroneous written advice we gave you, if you meet the following criteria:
- The advice was in direct response to a written request for advice.
- The erroneous advice was not the result of material omissions or misinformation in the written request for advice.
- You reasonably relied on our written advice and were penalized based on that advice.
If you believe you meet the criteria above, you must mail a statement, signed under penalty of perjury, outlining how the erroneous advice resulted in the penalty. You must include a copy of both the written request for advice and a copy of the written advice you received in response to your request. Mail the statement and supporting documentation to the address listed on your penalty notice.
Tips for next year
To avoid a similar penalty next year, the following rules generally apply:
- Corporations must make installment estimated tax payments when the total tax for the year (less applicable credits) is expected to be $500 or more.
- Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. If any date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next regular business day.
- Corporations must use electronic funds transfer to make installment payments of estimated tax.
- Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to compute estimated tax. See the Instructions for Form 1120-W.
- If a corporation overpays estimated tax, it may be able to get a quick refund by filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. See the instructions for Schedule J, Part III, line 15.