Instructions for Form 2210
Underpayment of Estimated Tax by Individuals, Estates, and Trusts

Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions

Purpose of Form

Generally, use Form 2210 to see if you owe a penalty for underpaying your estimated tax and, if you do, to figure the amount of the penalty. If you are not required to file Form 2210, you can use it to figure your penalty if you wish to do so. In that case, enter the penalty on your return, but do not file Form 2210.

Who Must File Form 2210

In most cases, you do not need to file Form 2210. The IRS will figure any penalty you owe and send you a bill. See The IRS Will Figure the Penalty for You, below. Use the chart at the top of page 1 of Form 2210 to see if you need to file Form 2210.

The IRS Will Figure the Penalty for You

Because Form 2210 is complicated, we strongly encourage you to let the IRS figure the penalty. If you owe it, we will send you a bill. If you file your return by April 15, 2008, we will not charge you interest on the penalty if you pay by the date specified on the bill.

If you want us to figure the penalty for you, complete your return as usual. Leave the penalty line on your return blank; do not file Form 2210.

Caution: See Part II of the form. If box B, C, or D is checked, you must figure the penalty yourself and attach a completed Form 2210 to your return.

Other Methods of Figuring the Penalty

We realize that there are different ways to figure the correct penalty. You do not have to use the method used on Form 2210 as long as you enter the correct penalty amount on the penalty line of your return.

However, if you are required to file Form 2210 because one or more of the boxes in Part II applies to you, you must complete certain lines.

• If you use the short method, check the applicable boxes in Part II, complete lines 1 through 14, and enter the penalty on line 17.


• If you use the regular method, check the applicable boxes in Part II, complete lines 1 through 9 and lines 18 through 26, and enter the penalty on line 31.


• If you use the annualized income installment method, check the applicable boxes in Part II, complete lines 1 through 9, Schedule AI, and lines 18 through 26, and enter the penalty on line 31.

Who Must Pay the Underpayment Penalty

In general, you may owe the penalty for 2007 if you did not pay at least the smaller of:

• 90% of the tax shown on your 2007 tax return, or


• 100% of the tax shown on your 2006 tax return (110% of that amount if you are not a farmer or fisherman and the adjusted gross income (AGI) shown on that return is more than $150,000, or, if married filing separately for 2007, more than $75,000).

The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment. This is true even if you are due a refund when you file your tax return. However, you may be able to reduce or eliminate the penalty by using the annualized income installment method. For details, see the Schedule AI instructions beginning on page 4.

Return. In these instructions, "return" refers to your original return. However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Also, a joint return that replaces previously filed separate returns is considered the original return.

Exceptions to the Penalty

You will not have to pay the penalty if either (1) or (2) applies.

1. You had no tax liability for 2006, you were a U.S. citizen or resident alien for the entire year (or an estate of a domestic decedent or a domestic trust), and your 2006 tax return was (or would have been had you been required to file) for a full 12 months.


2. The total tax shown on your 2007 return minus the amount of tax you paid through withholding is less than $1,000. To determine whether the total tax is less than $1,000, complete lines 1-7.

Estates and trusts. No penalty applies to either of the following.

• A decedent's estate for any tax year ending before the date that is 2 years after the decedent's death.


• A trust that was treated as owned by the decedent if the trust will receive the residue of the decedent's estate under the will (or if no will is admitted to probate, the trust primarily responsible for paying debts, taxes, and expenses of administration) for any tax year ending before the date that is 2 years after the decedent's death.

Special Rules for Farmers and Fishermen

If you meet both tests 1 and 2 below, you do not owe a penalty for underpaying estimated tax.

1. Your gross income from farming and fishing is at least two-thirds of your annual gross income from all sources for 2006 or 2007.


2. You filed Form 1040 or 1041 and paid the entire tax due by March 3, 2008.

See chapter 2 of Pub. 505, Tax Withholding and Estimated Tax, for the definition of gross income from farming and fishing.

If you meet test 1 but not test 2, use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to see if you owe a penalty. If you do not meet test 1, use Form 2210.

Waiver of Penalty

If you have an underpayment, all or part of the penalty for that underpayment will be waived if the IRS determines that:

• In 2006 or 2007, you retired after reaching age 62 or became disabled, and your underpayment was due to reasonable cause, or


• The underpayment was due to a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty.

If requesting a waiver, do the following.

• Check box A or box B in Part II.


• If you checked box A, complete only page 1 of Form 2210 and attach it to your tax return (you are not required to figure the amount of penalty to be waived).


• If you checked box B, complete Form 2210 through line 16 (line 30 if you use the regular method) without regard to the waiver. Enter the amount you want waived in parentheses on the dotted line next to line 17 (line 31 for the regular method). Subtract this amount from the total penalty you figured without regard to the waiver, and enter the result on line 17 (line 31 for the regular method).


• Attach Form 2210 and a statement to your return explaining the reasons you were unable to meet the estimated tax requirements and the time period for which you are requesting a waiver.


• If you are requesting a waiver due to retirement or disability, attach documentation that shows your retirement date (and your age on that date) or the date you became disabled.


• If you are requesting a waiver due to a casualty, disaster, or other unusual circumstance, attach documentation such as copies of police and insurance company reports.

The IRS will review the information you provide and decide whether to grant your request for a waiver.

Additional Information

See Pub. 505, chapter 4, for more details and examples of filled-in Forms 2210.

For guidance on figuring estimated taxes for trusts and certain estates, see Notice 87-32, 1987-1 C.B. 477.

Specific Instructions

Part I—Required Annual Payment

Complete lines 1—9 to figure your required annual payment.

If you file an amended return by the due date of your original return, use the amounts shown on your amended return to figure your underpayment. If you file an amended return after the due date, use the amounts shown on the original return.

Exception. If you and your spouse file a joint return after the due date to replace previously filed separate returns, use the amounts shown on the joint return to figure your underpayment.

Line 1

Enter the amount from Form 1040, line 57; Form 1040A, line 35; Form 1040NR, line 52; or Form 1040NR-EZ, line 15. For an estate or trust, enter the amount from Form 1041, Schedule G, line 4.

Line 2

Enter the total of the following amounts on line 2.

• Self-employment tax.


• Tax from recapture of investment credit, low-income housing credit, qualified electric vehicle credit, Indian employment credit, new markets credit, or credit for employer-provided childcare facilities.


• Tax on early distributions from (a) an IRA or other qualified retirement plan, (b) an annuity, or (c) a modified endowment contract entered into after June 20, 1988.


• Tax on distributions from a Coverdell education savings account or a qualified tuition program not used for qualified education expenses.


• Tax on Archer MSA, Medicare Advantage MSA, or health savings account distributions not used for qualified medical expenses.


• Section 72(m)(5) excess benefits tax.


• Advance earned income credit payments.


• Tax on accumulation distribution of trusts.


• Interest due under sections 453(l)(3) and 453A(c) on certain installment sales of property.


• An increase or decrease in tax as a shareholder in a qualified electing fund.


• Tax on electing small business trusts included on Form 1041, Schedule G, line 7.


• Tax on income not effectively connected with a U.S. trade or business from Form 1040NR, lines 53 and 56.


• Additional tax on income you received from a nonqualified deferred compensation plan that fails to meet certain requirements.


• Household employment taxes, before subtracting any advance EIC payments made to your employees. Do not include this amount if you will enter -0- on Form 2210, line 6, and the amount on line 4 (excluding household employment taxes) would be less than $1,000.

Line 6

Enter the taxes withheld from Form 1040, lines 64 and 67; Form 1040A, line 38, plus any withheld amount written in on line 42; Form 1040NR, lines 59, 61, 66, 67, and 68; or Form 1040NR-EZ, line 18. For an estate or trust, enter the amount from Form 1041, line 24e.

Line 8

Enter the tax shown on your 2006 tax return (110% of that amount if the adjusted gross income shown on that return is more than $150,000, or, if married filing separately for 2007, more than $75,000). Figure your 2006 tax using the taxes and credits shown on your 2006 tax return. Use the same type of taxes and credits as shown on lines 1, 2, and 3 of this Form 2210.

If you are filing a joint return for 2007, but you did not file a joint return for 2006, add the tax shown on your 2006 return to the tax shown on your spouse's 2006 return and enter the total on line 8 (figured as explained above).

If you filed a joint return for 2006 but you are not filing a joint return for 2007, see Pub. 505, chapter 4, General Rule, to figure your share of the 2006 tax to enter on line 8.

If you did not file a return for 2006 or your 2006 tax year was less than 12 months, do not complete line 8. Instead, enter the amount from line 5 on line 9. However, see Exceptions to the Penalty on page 1.

Part III—Short Method

If you can use the short method (see Form 2210 for qualifications), complete lines 10—14 to figure your total underpayment for the year, and lines 15—17 to figure the penalty.

In certain circumstances, the IRS will waive all or part of the underpayment penalty. See Waiver of Penalty beginning on page 1.

Line 12

If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

Part IV—Regular Method

Use the regular method if you are not eligible to use the short method.

Form 1040NR or 1040NR-EZ filers. If you are filing Form 1040NR or 1040NR-EZ and did not receive wages as an employee subject to U.S. income tax withholding, the instructions for completing Part IV are modified as follows.

1. Skip column (a).


2. In line 18, column (b), enter one-half of the amount on line 9 of Part I (unless you are using the annualized income installment method).


3. In line 19, column (b), enter the total tax payments made through June 15, 2007, for the 2007 tax year. If you are treating federal income tax (and excess social security or tier 1 railroad retirement tax) as having been withheld evenly throughout the year, you are considered to have paid one-third of these amounts on each payment due date.


4. Skip all lines in column (b) that are shaded in column (a).

Section A—Figure Your Underpayment

Line 18

Enter on line 18, columns (a)-(d), the amount of your required installment for the due date shown in each column heading. For most taxpayers, this is one-fourth of the required annual payment shown on Part I, line 9. However, it may be to your benefit to figure your required installments by using the annualized income installment method. See the Schedule AI instructions beginning on page 4.

Line 19

Enter the estimated tax payments you made for the 2007 tax year, plus any federal income tax and excess social security and tier 1 railroad retirement tax withheld. If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

In column (a), enter the tax payments you made by April 15, 2007; in column (b), enter payments you made after April 15 through June 15, 2007; in column (c), enter payments you made after June 15 through September 15, 2007; and in column (d), enter payments you made after September 15, 2007, through January 15, 2008.

When figuring your payment dates and the amounts to enter on line 19 of each column, apply the following rules.

• For withheld federal income tax and excess social security or tier 1 railroad retirement tax, you are considered to have paid one-fourth of these amounts on each payment due date unless you can show otherwise.

Caution: If you treat withholding as paid for estimated tax purposes when it was actually withheld, you must check box D in Part II and complete and attach Form 2210 to your return.

• Include in your estimated tax payments any overpayment of tax from your 2006 tax return that you elected to apply to your 2007 estimated tax. If you file your return by the due date, treat the overpayment as a payment made on April 15, 2007. Payments made after the due date (not including extensions) are treated as made on the date of payment.

Example 1. You had federal income tax of $4,000 withheld from your wages during 2007 and elected to have the $1,000 overpayment from your 2006 return applied to your estimated tax payment. On line 19, you would enter $2,000, ($1,000 withholding + $1,000 overpayment) in column (a), and $1,000 (withholding) in columns (b), (c) and (d).

• If you file your return and pay the tax due by January 31, 2008, include on line 19, column (d), the amount of tax you pay with your tax return. In this case, you will not owe a penalty for the payment due on January 15, 2008.


• If you paid estimated tax on April 16 or 17, 2007, it is considered paid on April 15, 2007.


• If you paid estimated tax on September 16 or 17, 2007, it is considered paid on September 15, 2007, to the extent it is applied to the third required installment.

Line 25

If line 25 is zero for all payment periods, you do not owe a penalty. But if you checked box C or D in Part II, you must file Form 2210 with your return. If you checked box E, you must file page 1 of Form 2210 with your return.

In certain circumstances, the IRS will waive all or part of the underpayment penalty. See Waiver of Penalty beginning on page 1.

Section B—Figure the Penalty

Caution: Before completing Section B, read the following instructions through line 30, including Example 2 through Example 9.

Figure the penalty for each period by applying the appropriate rate against each underpayment shown on line 25. The penalty is figured for the number of days that the underpayment remained unpaid.

The rates are established at various times throughout the year. For the period covered by the 2007 Form 2210, there were two rates in effect over two rate periods. If an underpayment remained unpaid for more than one rate period, the penalty on that underpayment will be figured using more than one rate.

Use lines 27 and 29 to figure the number of days the underpayment remained unpaid. Use lines 28 and 30 to figure the actual penalty amount by applying the rate to the underpayment for the number of days it remained unpaid.

Your payments are applied first to any underpayment balance on an earlier installment. It does not matter if you designate a payment for a later period.

Example 2. You had a $500 underpayment for the April 15 installment. The June 15 installment required a payment of $1,200. On June 10, you made a payment of $1,200 to cover the June 15 installment. However, $500 of this payment is applied first to the April 15 installment. The penalty for the April 15 installment is figured to June 10 (56 days). The amount applied to the June 15 installment is $700.

List your payments made after 4/15/07. Before figuring your penalty in Section B, it will be helpful to list the payments you made after April 15, 2007, in the following tables.

In each table, list only the payments made during the dates shown in the table heading. Follow the instructions under Line 19 to determine the date of payment. In Table 1, list any overpayment from your 2006 return applied to your 2007 estimated tax payments as paid on 4/15/07. List any payment made on a balance due for your 2007 return on Table 2. Use the date you filed your return or 4/15/08, whichever is earlier, as the payment date.

-----------------------------------------------
                   Table 1
    Payments after 4/15/07 through 12/31/07
-----------------------------------------------
        Date                   Payments
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------

-----------------------------------------------
                   Table 2
    Payments after 12/31/07 through 4/15/08
-----------------------------------------------
        Date                   Payments
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------

Total days per rate period. If an underpayment remained unpaid for an entire rate period, use the chart below to determine the number of days to enter in each column. The chart is organized in the same format as Form 2210, Part IV, Section B.

--------------------------------------
          Chart of Total Days
--------------------------------------
Rate Period    (a)    (b)   (c)    (d)
--------------------------------------
 1 (Line 27)   260    199   107    --
--------------------------------------
 2 (Line 29)   106    106   106    91
--------------------------------------

For example, if you have an underpayment on line 25, column (a), but show no payments in Table 1, you would enter "260" on line 27, column (a).

Tip: When you make a payment during a rate period, see Table 4-1 (Pub. 505, chapter 4) for an easy way to figure the number of days the payment is late.

Rate Period 1

First, complete Section B, column (a), lines 27 through 30, for an underpayment shown on line 25, column (a). If there is also an underpayment shown in column (b), (c), or (d) on line 25, then complete lines 27 through 30 for those columns in a similar manner.

Line 27

Enter on line 27, column (a), the number of days from 4/15/07 to the date of the first payment listed in Table 1. If no payments are listed, enter "260" (see the Chart of Total Days, above).

Example 3. You had an underpayment of $5,000 on line 25, column (a), and your first payment shown in Table 1 was made on 4/30/07 in the amount of $3,000. Enter "15" (number of days from 4/15 to 4/30) on line 27, column (a).

Line 28

Make the computation requested on line 28 and enter the result. The amount you use as the "underpayment" on line 25 depends on whether any payments are listed in Table 1. See the instructions below and the examples in chapter 4 of Pub. 505.

If there are payments listed in Table 1. On a separate sheet of paper, apply the first payment to the underpayment shown on line 25, column (a). The "underpayment" for the computation on line 28 is the amount of payment applied to the line 25, column (a), underpayment. If the first payment is not enough to reduce the column (a) underpayment to zero, see condition 4 and Example 7 on this page. If the payment is more than the underpayment, apply only an amount equal to the underpayment and use that amount for the line 28 computation.

Example 4. Your underpayment on line 25 was $4,000. You paid $4,000 on 6/20/07. Enter $57.86 on line 28 ($4,000 × (66 ÷ 365) × .08).

Example 5. Your underpayment on line 25 was $5,000 and you paid $8,000 on 4/30/07. Because your payment was more than your underpayment, you apply $5,000 to the underpayment. Enter $16.44 on line 28 ($5,000 × (15 ÷ 365) × .08).

If there are no payments listed in Table 1. The "underpayment" is the entire underpayment balance, which equals the amount on line 25, column (a).

Determine if You Need To Make Additional Computations for Column (a)

Whether you need to make additional computations depends on which of the following four conditions applies to you.

1. The first (or only) payment listed in Table 1 was enough to reduce the underpayment to zero. There are no further computations to make for column (a). Figure the penalty for any other underpayments shown in columns (b)-(d) of line 25.


2. No payments are listed in Table 1. Figure the penalty in column (a) for the next rate period. See Rate Period 2, on this page.


3. Only one payment is listed in Table 1 and it did not reduce the underpayment to zero. Make one more computation for column (a) on lines 27 and 28. This second computation is to figure the penalty on the underpayment balance; that is, the portion of the underpayment that remained unpaid for the entire period. In this case, enter another number in the entry space for lines 27 and 28, as follows.


1. On line 27, enter "260," the total number of days in the period. See Total days per rate period, on page 3.


2. On line 28, make the computation and enter the result. In this case, however, the "underpayment" in the computation is the remaining balance of the underpayment.


3. Go to line 29 to figure the penalty on the underpayment balance for Rate Period 2.

Example 6. Assume the same facts as in Example 3 (see page 3), with $3,000 being the only payment listed in Table 1. After applying the $3,000 payment, the underpayment balance is $2,000. On line 27, enter "15" and "260" to reflect the number of days from 4/15 to the $3,000 payment (4/30) and the number of days to the end of the rate period. On line 28, enter the penalty for each underpayment:
$9.86 ($3,000 × (15 ÷ 365) × .08) and $113.97 ($2,000 × (260 ÷ 365) × .08).

      4/15/07
---------------
    Days:
    15
    ------------
27        260
----------------
    9.86
    ------------
28  $     113.97
----------------

4. Additional payments are listed in Table 1 and the first payment was not enough to reduce the underpayment to zero. On line 25, it is helpful to list the amounts and the payment dates that apply to the underpayment for that installment period. Then figure the penalty for each amount listed on line 25. See Example 7 below.

If an underpayment balance remains after applying all the payments, figure the penalty on the balance of the underpayment for the entire period. See Example 8 below.

Example 7. Your underpayment on line 25, column (a), is $6,000 and you made two payments: $3,500 on 4/30/07 and $2,500 on 6/1/07. On line 25, you can enter $6,000 or enter each payment and date separately, which will correspond with the two entries on lines 27 and 28 (see illustration below). Because the underpayment was paid with two payments on two different dates, you figure the penalty for each payment separately:
$11.51 ($3,500 × (15 ÷ 365) × .08) and $25.75 ($2,500 × (47 ÷ 365) × .08).

                   -----------------
                         4/15/07
                   -----------------
                       Days:
                       15
                       -------------
                   27          47
---------------    -----------------
    4/30  3,500
     6/1  2,500        11.51
                       -------------
25      6,000      28  $       25.75
---------------    -----------------

Example 8. Your underpayment on line 25, column (a), is $8,000 and you made two payments: $3,000 on 4/30/07 and $4,000 on 6/22/07. Lines 27 and 28 will each show three entries in column (a), one for each payment and a third for the underpayment balance of $1,000 ($8,000 - $7,000).

Line 27 will show "15" days (from 4/15 to 4/30), "68" days (from 4/15 to 6/22), and "260" days (from 4/15 to 12/31).

Line 28 will show $9.86, $59.62, and $56.99, computed as follows:
($3,000 (first payment) × (15 ÷ 365) × .08), ($4,000 (second payment) × (68 ÷ 365) × .08), and ($1,000 (remaining underpayment) × (260 ÷ 365) × .08).

Then figure the penalty for Rate Period 2 (lines 29 and 30) on the remaining $1,000.

Rate Period 2

If an underpayment balance remains after applying any payments in Table 1, figure the penalty attributable to that balance on lines 29 and 30. Generally, use the same steps as explained under the instructions for Rate Period 1. But use the dates and interest rate shown on lines 29 and 30 and the payments listed in Table 2.

Line 29

Enter on line 29, column (a), the number of days from 12/31/07 to the date of the first payment listed in Table 2. If no payments are listed in Table 2, enter "106."

Line 30

Figure line 30 in the same manner as line 28.

Example 9. Assume the same facts as in Example 8. The return was filed and full paid 4/15/08.

Enter "106" on line 29, column (a). Enter $20.27 on line 30 ($1,000 × (106 ÷ 366) × .07).

Schedule AI—Annualized Income Installment Method

If your income varied during the year because, for example, you operated your business on a seasonal basis, you may be able to lower or eliminate the amount of one or more required installments by using the annualized income installment method. Use Schedule AI to figure the required installments to enter on Form 2210, Part IV, line 18.

If you use Schedule AI for any payment due date, you must use it for all payment due dates. To figure the amount of each required installment, Schedule AI automatically selects the smaller of the annualized income installment or the regular installment (that has been increased by the amount saved by using the annualized income installment method in figuring any earlier installments).

To use the annualized income installment method, you must do all of the following.

1. Complete Schedule AI, Part I (and Part II, if necessary). Enter the amounts from line 25, columns (a)-(d), in the corresponding columns of Form 2210, Part IV, line 18.


2. Complete Part IV to figure the penalty.


3. Check box C in Part II.


4. Attach both Form 2210 and Schedule AI to your return.

Additional information. See Pub. 505, chapter 4, for more details about the annualized income installment method and a completed example. Estates and trusts with short tax years, see Notice 87-32.

Form 1040NR or 1040NR-EZ filers. If you are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U.S. income tax withholding, follow these modified instructions for Schedule AI.

1. Skip column (a).


2. Enter on line 1 your income for the period that is effectively connected with a U.S. trade or business.


3. Increase the amount on line 17 by the amount determined by multiplying your income for the period that is not effectively connected with a U.S. trade or business by the following.


• In column (b), 72%.


• In column (c), 45%.


• In column (d), 30%.

However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2.4, 1.5, and 1, respectively.

4. Enter on line 22, column (b), one-half of the amount from Form 2210, Part I, line 9. In columns (c) and (d), enter one-fourth of that amount.


5. Skip column (b), lines 20 and 23.

Part I—Annualized Income Installments

Line 1

For each period (column), figure your total income minus your adjustments to income. Include your share of partnership or S corporation income or loss items for the period.

If you are self-employed, be sure to take into account the deduction for one-half of your self-employment tax. To figure this amount for each period, complete Schedule AI, Part II, and divide the amount in columns (a)-(d) on line 34 by 8, 4.8, 3, and 2, respectively.

Line 2

Estates and trusts, do not use the amounts shown in columns (a)-(d). Instead, use 6, 3, 1.71429, and 1.09091, respectively, as the annualization amounts.

Line 6

If you itemized your deductions, multiply line 4 of each column by line 5 and enter the result on line 6. But if line 3 is more than $156,400 ($78,200 if married filing separately), use the worksheet on this page to figure the amount to enter on line 6. Complete the worksheet for each period, as necessary.

Itemized Deductions Worksheet—Line 6

----------------------------------------------------------------------
 1. Enter the amount from Schedule AI, line 4               1. _______
 2. Enter the amount included in line 1 for medical and
    dental expenses, investment interest, casualty or
    theft losses, and gambling losses                       2. _______
 3. Subtract line 2 from line 1                             3. _______
 4. Enter the number given on Schedule AI, line 5           4. _______
 5. Multiply line 1 by line 4                               5. _______
    Note. If the amount on line 3 is zero, stop here and
    enter the amount from line 5 on Schedule AI, line 6.
 6. Multiply line 3 by line 4                               6. _______
 7. Multiply line 6 by 80% (.80)                            7. _______
 8. Enter the amount from Schedule AI, line 3               8. _______
 9. Enter $156,400 ($78,200 if married filing separately)   9. _______
10. Subtract line 9 from line 8                            10. _______
    Note. If line 10 is zero or less, your deduction is
    not limited. Stop here and enter the amount from line
    5 on Schedule AI, line 6.
11. Multiply line 10 by 3% (.03)                           11. _______
12. Enter the smaller of line 7 or line 11                 12. _______
13. Divide line 12 by 3.0                                  13. _______
14. Subtract line 13 from line 12                          14. _______
15. Subtract line 14 from line 5. Enter the result here
    and on Schedule AI, line 6                             15. _______
----------------------------------------------------------------------

Line 10

For each column, multiply $3,400 by your total exemptions. But if line 3 is more than the amount shown below for your filing status, use the worksheet on this page to figure the amount to enter on line 10. Complete the worksheet for each period, as necessary.

Single                       $156,400
Married filing jointly or
qualifying widow(er)         $234,600
Married filing separately    $117,300
Head of household            $195,500

Deduction for Exemptions Worksheet—Line 10

----------------------------------------------------------------------
 1. Multiply $3,400 by the number of exemptions you
    claimed                                                 1. _______
 2. Enter the amount from Schedule AI, line 3               2. _______
 3. Enter the amount shown below for your filing status
      Single—$156,400
      Married filing jointly or qualifying
      widow(er)—$234,600
      Married filing separately—$117,300
      Head of household—$195,500                           3. _______
 4. Subtract line 3 from line 2                             4. _______
 5. Is line 4 more than $122,500 (more than $61,250 if
    married filing separately)?
    [] Yes. Multiply $1,133 by the number of exemptions
       you claimed and enter the result here and on
       Schedule AI, line 10. Do not complete the rest of
       this worksheet.
    [] No. Divide line 4 by $2,500 ($1,250 if married
       filing separately). If the result is not a whole
       number, increase it to the next whole number (for
       example, increase 0.0004 to 1)                       5. _______
 6. Multiply line 5 by 2% (.02). Enter the result as a
    decimal                                                 6. _______
 7. Multiply line 1 by line 6                               7. _______
 8. Divide line 7 by 1.5                                    8. _______
 9. Subtract line 8 from line 1. Enter the result here
    and on Schedule AI, line 10                             9. _______
----------------------------------------------------------------------

Line 12

To compute the tax, use the Tax Table, Tax Computation Worksheet, Qualified Dividends and Capital Gain Tax Worksheet (see note), Schedule D Tax Worksheet, Foreign Earned Income Tax Worksheet (see note), Schedule J, or Form 8615.

Note. If you need to compute tax using the Qualified Dividends and Capital Gains Tax Worksheet or the Foreign Earned Income Tax Worksheet, use the appropriate worksheet in Pub. 505, chapter 4.

Line 14

Enter all of the other taxes you owed because of events that occurred during the months shown in the column headings. Include the same taxes used to figure Form 2210, Part I, line 2 (except self-employment tax), plus the tax from Form 4972, Tax on Lump-Sum Distributions, and any alternative minimum tax (AMT).

To figure the AMT, individuals use Form 6251, Alternative Minimum Tax— Individuals; estates and trusts use Schedule I of Form 1041. Figure alternative minimum taxable income based on your income and deductions during the periods shown in the column headings. Multiply this amount by the annualization amounts shown for each column on Schedule AI, line 2, before subtracting the AMT exemption.

Line 16

For each column, enter the credits you are entitled to because of events that occurred during the months shown in the column headings. These are the credits you used to arrive at the amounts on lines 1 and 3 of Part I, Required Annual Payment.

When figuring your credits, annualize any item of income or deduction used to figure each credit. For example, if your earned income (and AGI) for the first period (column (a)) is $8,000 and you qualify for the earned income credit (EIC), use your annualized earned income ($32,000) to figure your EIC for column (a). See the example under Completing Schedule AI, in chapter 4 of Pub. 505.

Part II—Annualized Self-Employment Tax

If you had net earnings from self-employment during any period, complete Part II for that period to figure your annualized self-employment tax.

If you are married and filing a joint return and both you and your spouse had net earnings from self-employment, complete a separate Part II for each spouse. Enter on line 13 the combined amounts from line 34 of both Parts II.

Line 26

To figure your net earnings from self-employment on line 26, multiply your net profit from all trades or businesses for each period by 92.35% (.9235).

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.

                      Short           Regular
                     Method           Method
Recordkeeping        13 min.          13 min.
Learning about
the law or the
form                 15 min.          31 min.
Preparing the
form                 32 min.    2 hr., 2 min.
Copying,
assembling, and
sending the form
to the IRS           16 min.          41 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.