Underpayment of Estimated Tax by Corporations

2009 Instructions for Form 2220, Underpayment
of Estimated Tax by Corporations
Purpose: This is the first circulated draft of the 2009 Instructions for Form 2220, for
your review and comments. See below for a discussion of major changes.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2008 Instructions for Form 2220 is available at:
http://www.irs.gov/pub/irs-pdf/i2220.pdf
Form: The 2009 Form 2220 was circulated earlier at:
http://linprod1.publish.no.irs.gov/tfpcirc/circ/2009/circ_09f2220_20090814112122.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at: http://taxforms.web.irs.gov/Circulations/index.htm
Comments: Please email, fax, call, or mail any comments by October 9, 2009, to me at
the address below and email the form’s reviewer, Joan McAlpine, at
[email protected].
Kelli Slaton
Tax Law Specialist
SE:W:CAR:MP:T:B:P
Phone: 202-283-2734 (NCFB)
Email: [email protected]
Major Changes to the 2009 Instructions for Form 2220
•

All years and other references have been updated as appropriate throughout the
instructions.

•

We added a "What's New" to reflect the repeal of corporate adjustments reflected
by PL 111-42, section 202.

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Instructions for Form 2220

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(Init. & date)

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2009

Department of the Treasury
Internal Revenue Service

Instructions for Form 2220
Underpayment of Estimated Tax by Corporations
Section references are to the Internal Revenue Code unless
otherwise noted.

amended return is filed before the applicable installment due
date.

General Instructions

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.

What’s New
Section 401 of the Tax Increase Prevention and
Reconciliation Act of 2005 (and any modification of this
section contained in any other provision of law) does not
apply to any corporate estimated tax installment payments,
which, without regard to that section, would otherwise be
due after December 31, 2009. Therefore, no adjustments
are needed for installments due after December 31, 2009.

Exception to the Penalty
A corporation will not have to pay a penalty if the tax shown
on the corporation’s 2009 return (the Part I, line 3 amount) is
less than $500.

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 on page 1 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, on page 2) figuring its first
required installment based on the prior year’s tax.

Who Must Pay the Underpayment
Penalty

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
line 33, page 1 of Form 1120; 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.

Specific Instructions

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 2009 return, or
2. The tax shown on its 2008 return (if it filed a 2008
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

Part I. Required Annual Payment
Complete lines 1 through 5 to figure the corporation’s
required annual payment.
Line 1. Generally, enter the tax from Form 1120, line 31; or
the applicable line for other income tax returns. However, if
that amount includes any tax attributable to a sale described
in section 338(a)(1), do not include that tax on line 1.
Instead, write “Sec. 338 gain” and show the amount of tax in
brackets on the dotted line next to line 1. This exclusion
from the line 1 amount does not apply if a section 338(h)(10)
election is made.
For information on how to figure the total tax for
estimated tax purposes for other entities, see the following
forms or their instructions.

Cat. No. 64293P

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Instructions for Form 2220

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990-PF
990-T
1120-C
1120-F

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•
•
•

1120-FSC
1120-L
1120-ND
1120-PC

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•
•
•

the corporation has been in existence. A large corporation
includes a “large organization” as defined in the instructions
for Form 990-W.
Taxable income, for this purpose, is modified to exclude
net operating loss and capital loss carrybacks and
carryovers. Members of a controlled group, as defined in
section 1563, must divide the $1 million amount among
themselves under rules similar to those in section 1561.
If the corporation is a large corporation, check the box on
Part II, line 8, and, if applicable, check the box(es) on Part II,
line 6 and/or line 7. Also, if applicable, complete Parts I, II,
and III of Schedule A, as discussed on this page.
For more information, see Regulations section 1.6655-4.

1120-REIT
1120-RIC
1120S
1120-SF

Line 2c. Enter the amount from Form 1120, Line 32f(2); or
the applicable line for other income tax returns.
Line 4. All filers (other than S corporations). Figure the
corporation’s 2008 tax the same way the amount on line 3 of
this form was determined, using the taxes and credits from
its 2008 tax return. However, skip line 4 and enter on line 5
the amount from line 3 if either of the following applies.
• The corporation did not file a tax return for 2008 that
showed a liability for at least some amount of tax.
• The corporation had a 2008 tax year of less than 12
months.
S corporations. Enter on line 4 the sum of:
1. The total of the investment credit recapture tax and
the built-in gains tax shown on the return for the 2009 tax
year and
2. Any excess net passive income tax shown on the S
corporation’s return for the 2008 tax year.

Part III. Figuring the Underpayment
Line 9. The corporation is generally required to enter the
15th day of the 4th (Form 990-PF filers use the 5th month),
6th, 9th, and 12th months of its tax year.
Line 10. If multiple columns have the same due date, see
the instructions for line 9. Large corporations, follow the
instructions below.
1. If the box on line 8 (but not line 6 or line 7) is checked
and line 3 is smaller than line 4, enter 25% of line 3 in
columns (a) through (d) of line 10.
2. If the box on line 8 (but not line 6 or line 7) is checked
and line 4 is smaller than line 3, enter 25% of line 4 in
column (a) of line 10. In column (b), figure the amount to
enter as follows:
a. Subtract line 4 from line 3,
b. Add the result to the amount on line 3, and
c. Multiply the total in item b above by 25%, and enter
the result in column (b).
In columns (c) and (d), enter 25% of line 3.
3. If the box on line 8 and the box on line 6 and/or line 7
are checked, follow the instructions in items 1 and 2 above
by substituting Schedule A, line 35 for line 10 and complete
the rest of Schedule A, Part III.

If the 2008 tax year was less than 12 months, skip line 4
and enter on line 5 the amount from line 3.

Part II. Reasons for Filing
Lines 6 and 7. Adjusted seasonal installment method
and/or annualized income installment method. If the
corporation’s income varied during the year because, for
example, it operated its business on a seasonal basis, it
may be able to lower or eliminate the amount of one or more
required installments by using the adjusted seasonal
installment method and/or the annualized income
installment method.
Example. A ski shop, which receives most of its income
during the winter months, may benefit from using one or
both of these methods to figure its required installments.
The annualized income installment or adjusted seasonal
installment may be less than the required installment under
the regular method for one or more due dates. Using one or
both of these methods may reduce or eliminate the penalty
for those due dates.
Use Schedule A on pages 3 and 4 of Form 2220 to figure
one or more required installments. If Schedule A is used for
any payment due date, it must be used for all payment due
dates. To arrive at the amount of each required installment,
Schedule A automatically selects the smallest of:
• The adjusted seasonal installment (if applicable),
• The annualized income installment (if applicable), or
• The regular installment under section 6655(d)(1)
(increased by any recapture of a reduction in a required
installment under section 6655(e)(1)(B)).
Follow the steps below to determine which parts of the
form have to be completed.
• If the corporation is using only the adjusted seasonal
installment method, check the box in Part II, line 6, and
complete Schedule A, Parts II and III.
• If the corporation is using only the annualized income
installment method, check the box on Part II, line 7, and
complete Schedule A, Parts II and III.
• If the corporation is using both methods, check the boxes
in Part II, lines 6 and 7, and complete all three parts of
Schedule A.
Line 8. Large corporations. A large corporation is a
corporation (other than an S corporation) that had, or whose
predecessor had, taxable income (defined below) of $1
million or more for any of the 3 tax years immediately
preceding the 2009 tax year, or if less, the number of years

Line 11. Enter the estimated tax payments made by the
corporation for its tax year as indicated below. Include any
overpayment from the corporation’s 2008 tax return that was
credited to the corporation’s 2009 estimated tax. If an
installment is due on a Saturday, Sunday, or legal holiday,
payments made on the next day that is not a Saturday,
Sunday, or legal holiday are considered made on the due
date to the extent the payment is applied against that
required installment. If multiple columns have the same due
date, see the instructions for line 9.
Column (a). Enter payments made by the date on line
9, column (a).
Columns (b), (c), and (d). Enter payments made by
the date on line 9 for that column and after the date on line 9
of the preceding column.
Line 17. If any of the columns in line 17 shows an
underpayment, complete Part IV to figure the penalty.

Part IV. Figuring the Penalty
Complete lines 19 through 38 to determine the amount of
the penalty. The penalty is figured for the period of
underpayment using the underpayment rate determined
under section 6621(a)(2). The period of underpayment runs
from the installment due date to the earlier of the date the
underpayment is actually paid or the 15th day of the third
month after the close of the tax year. For information on
obtaining the interest rate on underpayments, see the
footnote on page 2 of Form 2220.
Line 19. A payment of estimated tax is applied against
unpaid required installments in the order in which

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Instructions for Form 2220

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installments are required to be paid, regardless of the
installment to which the payment pertains.

Example. An amusement park with a 2009 calendar tax
year receives the largest part of its taxable income during
the 6-month period from May through October. To compute
its base period percentage for this 6-month period in 2009,
the amusement park figures its taxable income for each
May – October period in 2006, 2007, and 2008. It then
divides the taxable income for each May – October period by
the total taxable income for that particular tax year. The
resulting percentages are: 69% (.69) for May – October
2006, 74% (.74) for May – October 2007, and 67% (.67) for
May – October 2008. Because the average of 69%, 74%,
and 67% is 70%, the base period percentage for
May – October 2009 is 70%. Therefore, the amusement park
qualifies for the adjusted seasonal installment method.

Example. A corporation underpaid the April 15
installment by $1,000. The June 15 installment requires a
payment of $2,500. On June 10, the corporation deposits
$2,500 to cover the June 15 installment. However, $1,000 of
this payment is applied against the April 15 installment. The
penalty for the April 15 installment is figured from April 15 to
June 10 (56 days). The remaining $1,500 is applied to the
June 15 installment.
If the corporation has made more than one payment for a
required installment, attach a separate computation for each
payment.

Line 2. If the corporation has certain extraordinary items,
special rules apply. Do not include on line 2 the de minimis
items that the corporation chooses to include on line 9b. See
Extraordinary items on this page.

Schedule A
Extraordinary items. Generally, under the annualized
income installment method, extraordinary items must be
taken into account after annualizing the taxable income for
the annualization period. Similar rules apply in determining
taxable income under the adjusted seasonal installment
method. An extraordinary item includes:
• Any item identified in Regulations section
1.1502-76(b)(2)(ii)(C)(1), (2),(3),(4), (7) and (8);
• A net operating loss carryover;
• A section 481(a) adjustment; and
• Net gain or loss from the disposition of 25% or more of
the fair market value of the corporation’s business assets
during the tax year.

Line 9b. If the corporation has extraordinary items of
$1,000,000 or more, a net operating loss deduction, or a
section 481(a) adjustment, special rules apply. Include these
amounts on line 9b for the appropriate period. Also include
on line 9b the de minimis items that the corporation chooses
to exclude from line 2. See Extraordinary items on this page.
Line 15. Compute the alternative minimum tax (AMT) on
Form 4626, Alternative Minimum Tax-Corporations, if
applicable. Figure alternative minimum taxable income
(AMTI) based on the corporation’s income and deductions
for the months shown in the column headings directly above
line 1. For each column, divide the AMTI by the amount
shown on line 8 before subtracting the AMT exemption
amount under section 55(d). Enter on line 15, column (d),
the AMT determined for column (d). For columns (a) through
(c) only, first multiply the AMT determined by the amounts
shown in columns (a) through (c) of line 13 and then enter
on line 15 the result for each column.

These extraordinary items must be accounted for, in the
appropriate annualization period. However, a net operating
loss deduction and a section 481(a) adjustment (unless the
corporation makes the alternative choice under Regulations
section 1.6655-2(f)(3)(ii)(C)) are treated as extraordinary
items occurring on the first day of the tax year in which the
item is taken into account in determining taxable income.
De minimis rule. Extraordinary items identified above
that are less than $1,000,000 (other than a net operating
loss carryover or a section 481(a) adjustment) may be
annualized using the general rules of Regulations section
1.6655-2(f), or, if the corporation chooses, may be taken into
account after annualizing the taxable income for the
annualization period.

Line 16. Enter on line 16 any other taxes the corporation
owed for the months shown in each column heading directly
above line 1. Include the same taxes used to figure Part I,
line 1 of Form 2220, but do not include the personal holding
company tax and interest due under the look-back method
of section 460(b)(2) for completed long-term contracts or
section 167(g)(2) for property depreciated under the income
forecast method.

In Part II of Schedule A, make the appropriate
adjustments to annualized taxable income before figuring
the estimated tax for each reporting period. Similar
adjustments must be made, if applicable, to Part I of
Schedule A, if the adjusted seasonal installment method
applies. See the instructions for lines 2, 9b, 21 and 23b.

Line 18. Enter the credits the corporation is entitled to for
the months shown in each column heading above line 1.

Part II. Annualized Income Installment
Method

For more information regarding extraordinary items, see
Regulations section 1.6655- 2(f)(3)(ii) and the examples in
Regulations section 1.6655-2(f)(3)(vii). Also see Regulations
section1.6655-3(d)(3).

Line 20. Annualization periods. Enter on line 20, columns
(a) through (d), respectively, the annualization periods for
the option shown in the tables below. For example, if the
corporation elected Option 1, enter on line 20 the
annualization periods 2, 4, 7, and 10, in columns (a) through
(d), respectively.

Part I. Adjusted Seasonal Installment
Method
The corporation can use the adjusted seasonal installment
method only if the corporation’s base period percentage for
any 6 consecutive months of the tax year is 70% or more.
The base period percentage for any period of 6 consecutive
months is the average of the 3 percentages figured by
dividing the taxable income for the corresponding
6-consecutive-month period in each of the 3 preceding tax
years by the total taxable income for each of the 3 preceding
tax years, respectively. Figure the base period percentage
using the 6-month period in which the corporation normally
receives the largest part of its taxable income.

Use Option 1 or Option 2 only if the corporation
elected to do so by filing Form 8842, Election To Use
CAUTION Different Annualization Periods for Corporate
Estimated Tax, by the due date of the first required
installment payment. Once made, the election is irrevocable
for the particular tax year.

!

Option 2 is not available to tax-exempt organizations and
private foundations. See the options shown in the table
below for these entities.

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Instructions for Form 2220

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Corporations

before subtracting the AMT exemption amount under
section 55(d). Enter on line 25 the result for each column.
Line 26. Enter any other taxes the corporation owed for the
months shown in each column on line 20. Include the same
taxes used to figure Part I, line 1 of Form 2220, but do not
include the personal holding company tax and interest due
under the look-back method of section 460(b)(2) for
completed long-term contracts or section 167(g)(2) for
property depreciated under the income forecast method.
Line 28. Enter the credits the corporation is entitled to for
the months shown in each column on line 20. Do not
annualize any credit. However, when figuring the credits,
annualize any item of income or deduction used to figure the
credit.

1st
2nd
3rd
4th
Installment Installment Installment Installment

Standard option

3

3

6

9

Option 1

2

4

7

10

Option 2

3

5

8

11

Tax-Exempt Organizations and Private Foundations
1st
2nd
3rd
4th
Installment Installment Installment Installment

Standard option

2

3

6

9

Option 1

2

4

7

10

Line 21. Enter on line 21 the taxable income (line 30, Form
1120; or the applicable line for other income tax returns) that
the corporation received for the months entered for each
annualization period in columns (a) through (d) on line 20.
If the corporation has extraordinary items, special rules
apply. Do not include on line 21 the de minimis extraordinary
items that the corporation chooses to include on line 23b.
See Extraordinary items on page 3.
Line 22. Annualization amounts. Enter on line 22,
columns (a) through (d), respectively, the annualization
amounts shown in the tables below for the option used for
line 20 above. For example, if the corporation elected Option
1, enter on line 22 the annualization amounts 6, 3, 1.71429,
and 1.2, in columns (a) through (d), respectively.
Corporations

Part III. Required Installments
Line 33. Before completing line 33 in columns (b) through
(d), complete lines 34 through 38 in each of the preceding
columns. For example, complete lines 34 through 38 in
column (a) before completing line 33 in column (b).
Line 38. For each installment, enter the smaller of line 34
or line 37 on line 38. Also enter the result on page 1, line 10.
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 can 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
average time is:

1st
2nd
3rd
4th
Installment Installment Installment Installment

Standard option

4

Option 1

6

3

Option 2

4

2.4

4

2

1.33333

1.71429

1.2

1.5

1.09091

Tax-Exempt Organizations and Private Foundations
1st
2nd
3rd
4th
Installment Installment Installment Installment

Standard option

6

4

2

Option 1

6

3

1.71429

1.33333
1.2

Form

Line 23b. If the corporation has certain extraordinary items
of $1,000,000 or more, a net operating loss deduction, or a
section 481(a) adjustment, special rules apply. Include these
amounts on line 23b. Also include on line 23b the de
minimis extraordinary items that the corporation chooses to
exclude from line 21. See Extraordinary items on page 3.
Line 25. Compute the alternative minimum tax (AMT) on
Form 4626, if applicable. Figure alternative minimum taxable
income (AMTI) based on the corporation’s income and
deductions for the annualization period entered in each
column on line 20. Multiply AMTI by the annualization
amounts (line 22) used to figure annualized taxable income

2220
2220, Schedule A, Part I
2220, Schedule A, Part II
2220, Schedule A, Part III

Recordkeeping

Learning
Preparing and
about the law
sending the
or the form form to the IRS

29 hr., 39 min. 2 hr., 40 min.
24 hr., 37 min.
— —
12 hr., 26 min.
— —
6 hr., 13 min.
— —

3 hr., 17 min.
24 min.
12 min.
6 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.

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