Example. A, a fiscal year taxpayer with a taxable year from July 1, 1969, through June 30, 1970, had, without regard to the enactment of the Tax Reform Act of 1969, a total tax liability, which would have been shown on his return, of $500. A is not a farmer or fisherman described in section 6037(b). A's tax liability is increased by $20 to $520, attributable to an amendment made by such Act. A makes an installment payment of estimated tax of $90 on each of the following four installment dates: October 15, 1969; December 15, 1969; March 15, 1970; and July 15, 1970. Assume that A is unaffected by the exceptions provided in section 6654(d). Therefore, A is underpaid by $10 on both October 15 and December 15, and by $18 on both March 15 and July 15. Such underpayments are computed as follows:
(a) October 15 and December 15 installment dates: | |
(1) Tax without regard to Tax Reform Act of 1969 | $500 |
(2) 80% of item (1) | 400 |
(3) Minimum payment to avoid underpayment, determined without regard to Act: | |
October 15, 1969 (25% of item (2)) | 100 |
December 15, 1969 (25% of item (2)) | 100 |
(4) Actual payment: | |
October 15, 1969 | 90 |
December 15, 1969 | 90 |
(5) Amount of underpayment: | |
October 15, 1969 ($100-$90) | 10 |
December 15, 1969 ($100-$90) | 10 |
(b) March 15 and July 15 installment dates: | |
(1) Tax with regard to Act | 520 |
(2) 80% of item (1) | 416 |
(3) Less total of minimum payments to avoid underpayment, determined without regard to Act for October 15, 1969 and December 15, 1969 ($100 + $100) | 200 |
(4) Difference of items (2) and (3) | 216 |
(5) Minimum payment to avoid underpayment, determined with regard to Act: | |
March 15 (50% of $216) | 108 |
July 15 (50% of $216) | 108 |
(6) Actual payment: | |
March 15 | 90 |
July 15 | 90 |
(7) Amount of underpayment: | |
March 15 ($108-$90) | 18 |
July 15 ($108-$90) | 18 |
MISCELLANEOUS PROVISIONS
26 C.F.R. §1.9006-1