Form Ia 2220 - Underpayment Of Estimated Tax By Corporations And Financial Institutions - 2013 Page 2
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22013 IA 2220 Instructions
A. Purpose of Form
Exception 3: Tax on annualized income
Form IA 2220 will enable corporations and financial
This section applies if the corporation or financial institution
institutions to determine if they paid the correct amount of
made an estimated tax payment of at least 100% of the amount
estimated tax by the proper due date. If the minimum amount
it would owe if its estimated tax were a tax computed on
was not paid timely, an underpayment penalty is imposed for
annualized taxable income for the months preceding an
the period of the underpayment. This form helps you to
installment date.
determine whether or not you are subject to such a penalty.
A corporation or financial institution may thus annualize its
income:
B. Estimated Tax
(a) For the first 3 months if the installment was required to be
Every corporation or financial institution with $1,000 or more
paid in the 4th month;
in tax due after credits is required to file estimated tax.
(b) For the first 3 months or the first 5 months if the
C. Use of 2013 Form
installment was required to be paid in the 6th month;
The 2013 form must be used for taxable years beginning on
(c) For the first 6 months or the first 8 months if the
or after January 1, 2013.
installment was required to be paid in the 9th month; and
(d) For the first 9 months or for the first 11 months if the
D. Exceptions that Avoid the Underpayment Penalty
installment was required to be paid in the 12th month.
No penalty will be charged for any underpayment on line 8 if:
To annualize, multiply taxable income for the period by 12 and
(1) All of the payments were made on or before the due date
divide the resulting amount by the number of months in the
of the installment; and
period (3, 5, 6, 8, 9, or 11, as the case may be). Enclose
(2) The total payments made by that installment date equal or
corporation income statements for appropriate months in the
exceed the amount which would have been due if the
tax period.
estimated tax were calculated using any of the exceptions
E. Overpayment
listed below.
A payment of estimated tax on any installment date is
A different exception may be applied to each underpayment. If
considered a payment of any previous underpayment only to
there has been an underpayment of the amount of the estimated
the extent the payment exceeds the amount of the installment
tax, and the taxpayer believes that one or more of the
as computed on line 5.
exceptions to the penalty precludes the assertion of the
underpayment penalty, the taxpayer should complete lines 9
F. To Compute Penalty
through 12 showing the applicability of any exception upon
which the taxpayer relies. If no exception applies, complete
Use the following formula:
lines 13 through 19 to determine the amount of the penalty on
Penalty = daily % rate x number of days x underpayment
the underpayment from line 8.
(line 17)
(line 16)
(line 14)
Exception 1: Prior year’s tax
The daily percentage rate is:
5% per annum = 0.013699% per day (1/1/13 - 12/31/13)
This exception allows corporations and financial institutions to
substitute for the current year’s estimate the amount of the tax
5% per annum = 0.013699% per day (1/1/14 - 12/31/14)
shown on the return for the preceding taxable year. This
Date of payment (line 15): Once a payment is made to cover an
exception may be utilized only if the preceding taxable year
exception to the penalty, the underpayment is no longer
was a taxable year of 12 months and a return showing a tax
outstanding, so the penalty computation stops at the date that
liability (including a “zero” liability) was filed for that year.
payment is made.
Corporations or financial institutions filing an initial year Iowa
return may not use Exception 1.
Example: A corporation underpaid the April 30 installment by
$1,000. The June 30 installment requires a payment of $2,500.
Exception 2: Tax on prior year’s income using
On June 25, the corporation deposits $2,500 to cover the June
current year’s rates
30 installment. However, $1,000 of this payment is applied
against the April 30 installment. The penalty for the April 30
This exception allows corporations and financial institutions to
installment is figured from April 30 to June 25 (56 days). The
use a tax computed by using the current year’s rates but
remaining $1,500 is applied to the June 30 installment.
otherwise on the basis of the facts and law applicable to the
prior year. Corporations and financial institutions filing an
Please enclose this form with your corporation
initial year Iowa return may not use Exception 2.
income tax return, form IA 1120 or form IA 1120F.
Questions?
Call 1-800-367-3388 (Iowa, Omaha, Rock Island,
Moline) or 515-281-3114 (Des Moines, out of state)
E-mail: idr@iowa.gov
45-006b (07/15/13)
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