Knowledge Base Solution - Why is Form 2210 calculating a Penalty for Underpayment of Estimated Tax in a 1040 return?

Why is Form 2210 calculating a Penalty for Underpayment of Estimated Tax in a 1040 return?

Troubleshooting why an underpayment penalty is calculating by reversing through the calculations:

Start by comparing lines 18 and 19.
1. If Line 19 - Estimated tax paid and tax withheld, is less than Line 18 - Required installments for any quarter, a penalty will be calculated.
2. If Line 19 is incorrect, enter any additional payments or withholdings.
Next, determine how Line 18 - Required installments were determined.
1. If the regular method is being used, line 18 quarterly installments are calculated as 25% of Line 9, the required annual payment.
  - To determine how line 9 was calculated see Step 3 of this article.
  - If the annualized income installment method is being used, line 18 amounts come from Schedule AI line 25.
    - Part II box C will be checked.
    - Review the calculations on Schedule AI.
    - The income and deductions flowing to Schedule AI can be adjusted for each quarter.
Determine how Line 9 - Required annual payment is calculated:
- Line 9 is the smaller of Line 5 or Line 8.
  - Line 5 is 90% of the current year tax.
  - Line 8 - Maximum required annual payment based on prior year's tax is determined as follows:
    - 110% of prior year tax for taxpayers with prior year AGI of more than $150,000 if married filing joint, $75,000 for others.
    - 100% of prior year tax for taxpayers with prior year AGI of $150,000 or less if married filing joint, $75,000 for others.
- Make sure the prior year tax has been input.

Solution Id	000171551/Why-is-Form-2210-calculating-a-Penalty-for-Underpayment-of-Estimated-Tax-in-a-1040-return
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