Iowa Underpayment of Estimated Tax 45-006

Underpayment of Estimated Tax 45-006
IA 2220 underpayment of estimated tax by corporations, financial institutions, 45-006
2023 IA 2220 Underpayment of Estimated Tax

Corporations, S Corporations, Financial Institutions, and Partnerships
tax.iowa.gov

Name: ___________________________________________________________________________
Federal Employer Identification Number (FEIN): ___________________ Tax Period: ____________
This form must be included with your return, even if no underpayment penalty is due.
Computation of Underpayment
Note: If you meet any of the exceptions that avoid the underpayment penalty for all quarters (see
instructions), skip lines 1 through 8, and go directly to line 9.
1. 2023 tax from IA 1120, line 14, IA 1120F, line 12, IA 1120S, lines 35
and 38, or IA 1065, line 29........................................................................... 1. ________________
2. Credits from IA 1120, line 15, IA 1120F, line 13 and 15, IA 1120S,
lines 36 and 39, or IA 1065, line 30 ............................................................. 2. ________________
3. Balance. Subtract line 2 from line 1 ............................................................. 3. ________________
1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

4. Enter in columns 1 through 4 the installment dates that correspond to
the last day of the 4th, 6th, 9th, and 12th months of your taxable year.
5. Enter 25% of line 3 in columns 1 through 4.
6. (a) Amount paid or credited for each period
6. (b) Overpayment of previous installment. An overpayment on line 8 in
excess of all prior underpayments is to be applied as a credit against
the next installment.
7. Total of lines 6(a) and 6(b)
8. Underpayment: Subtract line 7 from line 5
Overpayment: Subtract line 5 from line 7
Exceptions that avoid the underpayment penalty; Exceptions 1 and 2 not applicable for initial year filers.
9. Total cumulative amount paid or credited from the beginning of the
taxable year through the installment dates that correspond to the last day
of the 4th, 6th, 9th, and 12th months of your taxable year
10. Exception 1: Prior year’s tax
11. Exception 2: Tax on prior year’s income using current year’s rates
12. Exception 3: Tax on annualized income. Include schedule.

25% of tax

50% of tax

75% of tax

100% of tax

25% of tax

50% of tax

75% of tax

100% of tax

25% of tax

50% of tax

75% of tax

100% of tax

Computation of Underpayment Penalty
13. Enter same installment dates used in line 4
14. Amount of underpayment from line 8
15. Date of payment. See Instructions.
16. (a) Number of days from due date of installment to date of payment or
12/31/2023, whichever is earlier
16. (b) Number of days inclusively from 01/01/2024, or due date of
installment, whichever is later, to the date of payment or the last day of
the 4th month after the close of the tax year, whichever is earlier
17. (a) 6% per year on the amount shown on line 14 for the number of
days shown on line 16(a). See Instructions.
17. (b) 10% per year on the amount shown on line 14 for the number of
days shown on line 16(b). See Instructions.
18. Total of lines 17(a) and 17(b).
19. Penalty: Add the four columns of line 18 and enter here. Also, show the amount on IA 1120, line 20; IA 1120F, line 19; IA
1120S, line 49; or IA 1065, line 40.
45-006a (10/10/2023)

What’s New for Tax Year 2023
This form has been modified to include partnerships or S
corporations that make a Pass-Through Entity Tax (PTET)
election to be taxed at the entity level pursuant to Iowa Code
section 422.16C. A partnership or S corporation that makes
a PTET election is required to make estimated tax payments
related to its PTET liability in the same manner as C
corporations. Important note: A partnership or S corporation
is not required to make estimated tax payments for tax year
2023 related to its PTET election if the entity’s tax year
begins before May 11, 2023. However, an S corporation
may still have estimated tax payment requirements related
to built-in gains/passive investment tax.
Purpose of Form
Corporations, financial institutions, S Corporations that
owe built-in gains/passive investment tax or make a PassThrough Entity Tax (PTET) election, and partnerships that
make a PTET election, use the IA 2220 to determine if they
paid the correct amount of estimated tax by the proper due
date. If the minimum amount was not paid timely, an
underpayment penalty is imposed for the period of the
underpayment. This form helps determine whether or not a
taxpayer is subject to such a penalty.
Estimated Tax
Every taxpayer with more than $1,000 in tax due after
credits is required to pay estimated tax.
Exceptions that Avoid the Underpayment Penalty
No penalty will be charged for any underpayment on line 8 if:
1. All of the payments were made on or before the due
date of the installment; and
2. The total payments made by that installment date equal
or exceed the amount which would have been due if the
estimated tax were calculated using any of the
exceptions listed below.
A different exception may be applied to each
underpayment. If there has been an underpayment of the
amount of the estimated tax, and the taxpayer believes that
one or more of the exceptions to the penalty precludes the
assertion of the underpayment penalty, the taxpayer
should complete lines 9 through 12 showing the
applicability of any exception upon which the taxpayer
relies. If no exception applies, complete lines 13 through
19 to determine the amount of the penalty on the
underpayment from line 8.
Line 10: Exception 1 – Prior year’s tax
This exception allows taxpayers to substitute for the current
year’s estimate the amount of the tax shown on the return
for the preceding taxable year. This exception may be
utilized only if the preceding taxable year was a taxable
year of 12 months and a return showing a tax liability
(including a “zero” liability) was filed for that year.
Taxpayers filing an initial year Iowa return may not use
Exception 1.
Note: This exception does not apply to partnerships that
did not make a PTET election in the previous tax year or

2023 IA 2220 Instructions

to S corporations that did not make a PTET election or
owe built-in gains/passive investment income tax in the
previous tax year.
Line 11: Exception 2 – Tax on prior year’s income using
current year’s rates
This exception allows taxpayers to use a tax computed
by using the current year’s rates but otherwise on the
basis of the facts and law applicable to the prior year.
Taxpayers filing an initial year Iowa return may not use
Exception 2.
Line 12: Exception 3 – Tax on annualized income
This section applies if the taxpayer made an estimated tax
payment of at least 100% of the amount it would owe if its
estimated tax were a tax computed on annualized taxable
income for the months preceding an installment date.
A taxpayer may thus annualize its income:
1. For the first 3 months if the installment was required to
be paid in the 4th month;
2. For the first 3 months or the first 5 months if the
installment was required to be paid in the 6th month;
3. For the first 6 months or the first 8 months if the
installment was required to be paid in the 9th month; and
4. For the first 9 months or for the first 11 months if the
installment was required to be paid in the 12th month.
To annualize, multiply taxable income for the period by
12 and divide the resulting amount by the number of
months in the period (3, 5, 6, 8, 9, or 11, as the case
may be). Enclose income statements for appropriate
months in the tax period.
Overpayment
A payment of estimated tax on any installment date is
considered a payment of any previous underpayment
only to the extent the payment exceeds the amount of the
installment as computed on line 5.
Line 15: Date of payment
Once a payment is made to cover an exception to the
penalty, the underpayment is no longer outstanding, so
the penalty computation stops at the date that payment
is made.
To Compute Penalty Use the following formula:
Penalty

=

Daily %
rate
(line 17)

x

Number of
days
(line 16)

x

Underpayment
(line 14)

The daily percentage rate is:
6% per annum = .016438% per day (01/01/23 - 12/31/23)
10% per annum = .027322%% per day (01/01/24 12/31/24)
Include this form with your Iowa return, IA 1120, IA
1120S, IA 1120F, or IA 1065.
Questions: Call 515-281-3114 or 800-367-3388
Additional information can be found on the Department
website (tax.iowa.gov).
Email: [email protected]
45-006b (10/10/2023)