Questions & Answers

What is Indiana Underpayment Penalty?

You might owe a penalty for the underpayment of estimated tax if you did not have taxes withheld from your income and/or you did not pay enough estimated tax throughout the year.

In fact, not properly paying estimated tax is one of the most common errors made in filing Indiana tax returns. Generally, if you owe $1,000 or more in state and county tax for the year that's not covered by withholding taxes, you need to be making estimated tax payments.

You might owe this penalty if:

  • The total of your credits, including timely estimated tax payments, is less than 90 percent of this year's tax due or 100 percent of last year's tax due, or
  • You underpaid the minimum amount due for one or more of the installment periods.
If either of these cases apply to you, you must complete Schedule IT-2210 or IT-2210A to see if you owe a penalty or if you meet an exception.

If you owe this penalty, enclose Schedule IT-2210 or IT-2210A with your tax return.

If you meet an exception, enclose Schedule IT-2210 or IT-2210A to show which exception was met.

You must have timely paid 100 percent of lines 8 and 9 of your 2017 IT-40 or IT-40PNR. Note: If last year's Indiana adjusted gross income was more than $150,000 ($75,000 for married filing separately), you must pay 110 percent of last year's tax (instead of 100 percent).

Important. The department will automatically figure a penalty for you if it looks like you owe a penalty for the underpayment of estimated tax, and:
  • You didn't report a penalty amount on line 20, and
  • You didn't enclose Schedule IT-2210 or Schedule IT-2210A showing you meet an exception to owing a penalty.

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