The federal tax underpayment penalty is an addition to tax for not paying enough through withholding and timely estimated payments during the year. For tax year 2025, the IRS generally computes it separately for each required installment, based on the unpaid amount, the days it remained unpaid, and the interest rate for each rate period. Paying the remaining balance when you file can stop further accrual on that amount, but it does not automatically erase a penalty from an earlier missed installment.
Most individuals do not have to calculate the charge themselves: unless a Form 2210 filing condition applies, the IRS calculates any penalty and mails a bill. The rules below apply to individuals, estates and trusts using the 2025 Form 2210; later tax years can have different thresholds, dates and rates.
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What the federal underpayment penalty covers
Federal income tax is generally expected to be paid as income is earned, through payroll or pension withholding and, when necessary, estimated tax payments. If those payments are not enough by the required dates, section 6654 can add an underpayment-of-estimated-tax penalty.
The calculation is installment-specific. The IRS states in the 2025 Form 2210 instructions that “The penalty is figured separately for each installment due date.” A later catch-up payment reduces or ends the charge on the amount it covers from the payment date forward; it does not make an earlier installment timely.
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This is different from the interest and penalties that can apply to an unpaid balance after the return’s filing deadline. The subject here is the estimated-tax underpayment addition calculated on Form 2210.
First test: did your 2025 payments meet a safe harbor?
For most calendar-year taxpayers, the 2025 required annual payment is the smaller of the following two amounts:
| Comparison | 2025 rule |
|---|---|
| Current-year test | 90% of your 2025 tax |
| Prior-year test | 100% of your 2024 tax, if the 2024 return covered 12 months |
| Higher-income prior-year test | 110% of 2024 tax if 2024 adjusted gross income exceeded $150,000, or $75,000 for married filing separately |
| Farmer or fisher current-year test | 66⅔% of 2025 tax instead of 90% when at least two-thirds of gross income in 2024 or 2025 came from farming or fishing |
These percentages are the safe-harbor rules in the 2025 instructions, not permanent rates for every tax year. Use the instructions for the specific year being filed.
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How required installments are scheduled
Meeting the annual safe harbor is not the same as making four timely payments. Under the regular method, the required annual payment is generally divided into four equal installments. For a calendar-year individual, the 2025 Form 2210 lists these dates:
| Installment | Due date for 2025 tax year |
|---|---|
| First | April 15, 2025 |
| Second | June 15, 2025 |
| Third | September 15, 2025 |
| Fourth | January 15, 2026 |
If a date falls on a Saturday, Sunday or legal holiday, the payment generally moves to the next day that is not a weekend or legal holiday. Fiscal-year taxpayers and taxpayers with unusual filing situations must use the dates and rules that apply to their year rather than automatically using this calendar-year schedule.
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Form 2210 carries earlier underpayments and overpayments into later installments. Therefore, comparing only the total paid by April 15, 2026, with the annual safe-harbor amount can give the wrong result. The IRS looks at how much was available at each due date.
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Withholding under the regular approach
Unless you establish a different payment pattern, withholding is treated as paid in four equal parts, one-fourth on each installment date. This rule can protect a taxpayer whose withholding occurred late in the year because the default treatment spreads it across the installments.
Estimated-tax payment timing
An estimated payment is credited in the period when it was actually made. A payment is applied first to any unpaid earlier installment. Only an excess can satisfy a later installment. Keep confirmation numbers, canceled checks or electronic-payment records showing the date the payment was submitted.
Payment made with the return
For the 2025 return, a balance-due payment made with the return is treated for the underpayment calculation using the earlier of the filing date or April 15, 2026. That treatment can stop the charge on the amount paid, but it does not retroactively turn an earlier installment into a timely payment.
Using actual withholding dates
If your actual withholding dates would produce a lower penalty than equal quarterly credit, you may request that treatment. Check box D in Part II of Form 2210 and attach the form. You must be able to support the dates and amounts; otherwise, the IRS uses the standard one-fourth-per-installment assumption.
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The 2025 penalty formula
For every installment shortfall, Form 2210 divides the outstanding period into the applicable rate periods. The basic calculation for one segment is:
Underpayment × days outstanding ÷ 365 × applicable annual rate
The worksheet then adds the amounts for all rate periods and all installments. The 2025 Form 2210 worksheet lists a 7% rate for each of the rate periods running from April 16, 2025, through April 15, 2026. That 7% figure belongs to the 2025 form; a later year can use different rates and must be checked separately.
Illustrative calculation
Suppose one required installment was $4,000 and the payment was 15 days late. For that rate segment, the worksheet arithmetic is $4,000 × 15 ÷ 365 × 7%, which is approximately $11.51. This is only the charge for that segment. A taxpayer could have additional installments, additional days or additional rate periods, so this example is not a personalized total.
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Why a late catch-up payment does not cure the first installment
Assume an installment was due April 15 and you paid the missing amount on June 30. The amount is no longer outstanding after June 30, so the charge stops on that amount then. The April 15 installment was nevertheless unpaid from April 16 through June 30, and that period remains part of the calculation. Form 2210 does not re-date the payment to April 15.
Regular method versus annualized income (Schedule AI)
The regular method assumes the annual required amount is divided according to the standard installment schedule. If income arrived unevenly, the annualized income installment method can better match tax to when income was earned.
| Method | When it can help | What it requires |
|---|---|---|
| Regular installments | Income and deductions are reasonably steady, or equal installments are simpler and sufficient | Compute the annual required payment and apply the carry-forward rules at each due date |
| Schedule AI | Seasonal income, a large late-year capital gain, or another pattern in which taxable income was concentrated later | Annualize cumulative income, deductions, credits and withholding for every required due date |
The 2025 Schedule AI periods end March 31, May 31, August 31 and December 31. A cash-method taxpayer generally includes income actually or constructively received and deductions actually paid during each period. The calculation uses the taxpayer’s specific income, deductions and credits, so accurate period-by-period records are essential.
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The IRS requires consistency: “If you use Schedule AI for any payment due date, you must use it for all payment due dates.” You cannot use annualization only for the quarter that produces the most favorable result.
When the IRS calculates the penalty and when you file Form 2210
If none of the Form 2210 filing conditions applies, the IRS says it will figure the penalty and send a bill. If you are filing a 2025 return by April 15, 2026, the instructions state that no interest will be charged on the penalty if you pay it by the date shown on the IRS bill. When the IRS is doing the calculation, leave the penalty line blank and do not attach Form 2210.
You generally attach Form 2210 when you need to report a partial waiver, use Schedule AI, or claim actual withholding-date treatment. Part II boxes B, C and D identify common reasons for filing. Filing the form can also let you calculate the amount in advance rather than waiting for a notice, but it does not guarantee a lower amount.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Waivers and other limited relief
The IRS may waive all or part of the penalty when the underpayment resulted from reasonable cause rather than willful neglect and one of the qualifying circumstances in the 2025 instructions applies. The listed grounds include:
- You retired after reaching age 62 during 2024 or 2025.
- You became disabled during 2024 or 2025.
- A casualty, disaster or other unusual circumstance made imposing the penalty inequitable.
A waiver request generally requires Form 2210 and a statement describing the circumstances, the affected period and the steps taken. Supporting documentation is required for some grounds. The IRS reviews the request and decides whether to grant it; meeting a listed circumstance is not an automatic approval.
Disaster-related deadline relief can change payment dates for eligible taxpayers. The 2025 instructions also refer to Notice 2026-3, which provides narrow relief from part of the section 6654 addition for certain qualified farmland property sales or exchanges when a section 1062(a) election is properly made. That notice is not a general capital-gain or farmer exemption.
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Common questions and mistakes
“I received a refund, so why would I owe an underpayment penalty?”
A refund or a small balance due at filing does not show that each installment was timely. The installment test looks at when withholding and estimated payments became available, not only the year-end total.
“I paid everything in April. Is the penalty automatically gone?”
No. The April payment can stop the charge after it is made, but an earlier installment can still have a penalty for the days it was underpaid.
“Can a late capital gain be ignored for estimated tax?”
Not automatically. If income was uneven, Schedule AI may annualize it and reduce or eliminate an earlier required installment. You must apply Schedule AI to every due date if you use it for any one of them.
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This article covers individuals, estates and trusts under Form 2210. Corporations generally use Form 2220. Farmers and fishers who fall under the specified rules may need Form 2210-F instead.
A practical 2025 checklist
- Complete your 2025 tax computation and identify withholding and estimated payments.
- Check the $1,000 exceptions and any no-prior-year-tax or farmer/fisher exception that may apply.
- Compare 90% of 2025 tax with the applicable prior-year percentage, using 110% when the 2024 AGI threshold applies.
- Divide the required annual payment into installments under the regular method, or gather cumulative records for Schedule AI if income was uneven.
- Credit withholding under the default quarterly rule unless you can document actual dates and will file box D.
- Apply each payment to the earliest unpaid installment and carry amounts forward.
- For each remaining shortfall, multiply the amount by days outstanding, divide by 365 and apply the rate printed for that period.
- Decide whether a Form 2210 filing condition or a waiver request applies; otherwise leave the penalty line for the IRS and wait for its bill.
For the controlling thresholds, dates, exceptions and rate periods, use the 2025 Instructions for Form 2210 and the 2025 Form 2210. The IRS catalog of current forms and instructions is at irs.gov/forms-instructions-and-publications. Recheck those materials before applying the method to a different tax year.
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