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No. The penalty isnt a straight 8% of the amount of tax due with the return, nor 8% of the underpayment, but the info given isn't enough to answer correctly on what their penalty will be based. You should use what is called the "Short Method" and is on page 2 of form 2210. If you figured your tax just ignore page 1 of 2210 and go to page 2. It's pretty simple. Just subtract how much Withholding or equal payments you made from last year's tax, or from 90% of this year's tax and multiply by the factors they give, which change every year.

1. The penalty is based on the DIFFERENCE between how much was withheld and the lesser of last year's tax or 90% of this year's tax. Once the $1,000 THRESHHOLD is passed forget it, your penalty is figured on the full difference.

2. If you paid 4 equal and on time installments, or just paid withholding alone, multiply the difference in #1 times .05258 minus .00022 times the number of days prior to April 15, 2007 that you paid the difference.

3. So if the difference is actually $600 and you pay it by February 15 the penalty is $600 X (.05258-.00022 X 59)= $600 X .05258-.01298) = $600 X .0396 = $23.76. And if the difference is $1,600, the penalty is $1600 X .0396 or $63.36. I doubt if the difference is either $600 or $1,600, but the penalty is only 1/2 of what you think it will be.


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