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General Instructions

Purpose of Form

Corporations (including S corporations), tax-exempt organizations subject to the unrelated business income tax, and private foundations use Form 2220 to determine:

  • Whether they are subject to the penalty for underpayment of estimated tax and, if so,

  • The amount of the underpayment penalty for the period that applies.

Who Must File

Generally, the corporation does not have to file this form with its income tax return because the IRS will figure the amount of any penalty and notify the corporation of any amount due. However, even if the corporation does not owe a penalty, complete and attach this form to the corporation's tax return if the Part I, line 3 amount is $500 or more and any of the following apply.

  1. The adjusted seasonal installment method is used.

  2. The annualized income installment method is used.

  3. The corporation is a large corporation (as defined in the instructions for Part II, line 8) figuring its first required installment based on the prior year's tax.

Who Must Pay the Underpayment Penalty

Generally, a corporation is subject to the penalty if it did not timely pay at least the smaller of:

  1. The tax shown on its 2016 return, or

  2. The tax shown on its 2015 return (if it filed a 2015 return showing at least some amount of tax and the return was for a full 12 months). However, a large corporation can base only its first required installment on the prior year's tax.

In these instructions, “return” generally refers to the corporation's original return. However, an amended return is considered the original return if the amended return is filed by the due date (including extensions) of the original return. Also, for purposes of determining a required installment, if an amended return is filed for the prior tax year, then “prior tax year” includes the amended return, but only if the amended return is filed before the applicable installment due date.

The penalty is figured separately for each installment due date. Therefore, the corporation may owe a penalty for an earlier due date even if it paid enough tax later to make up the underpayment. This is true even if the corporation is due a refund when its return is filed. However, the corporation may be able to reduce or eliminate the penalty by using the annualized income installment method or the adjusted seasonal installment method. See the instructions for Part II for details.

Exception to the Penalty

A corporation will not have to pay a penalty if the tax shown on the corporation's 2016 return (the Form 2220, Part I, line 3 amount) is less than $500.

How To Use Form 2220

  • Complete lines 1 through 3 of Part I. If line 3 is $500 or more, complete the rest of Part I to determine the required annual payment and go to Part II.

  • Check one or more boxes in Part II if the corporation uses the adjusted seasonal installment method, the annualized income installment method, or if the corporation is a large corporation.

    If the corporation checked a box in Part II, attach Form 2220 to the income tax return. Be sure to check the box on Form 1120, page 1, line 33; or the comparable line of any other income tax return the corporation is required to file (for example, Form 1120-C, 1120-L, or 1120S).

  • Complete Part III to determine the underpayment for any of the installment due dates.

  • If there is an underpayment on Part III, line 17 (column (a), (b), (c), or (d)), go to Part IV to figure the penalty.

  • Complete Schedule A if the corporation uses the adjusted seasonal installment method and/or the annualized income installment method.

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