General Rules

If a taxpayer fails to meet the installment payment requirements, there will be added to the tax due an amount determined at the rate established under c. 62C, s. 32 on the amount of the underpayment for the period of underpayment. The underpayment penalty is calculated on Massachusetts Form M-2210.

Calculating the Underpayment Penalty:

  1. tax after certain credits, Massachusetts Form 1, Line 31, or 1 NR/PY, Line 36;
  2. multiply by (.80) 80%;
  3. subtract estimated payments and withholding;
  4. net amount;
  5. multiply by applicable percentage (percentage varies per taxable year, see below);
  6. underpayment penalty due.

Calculating the Underpayment Penalty - Farmers and Fishermen:

  1. tax after certain credits, Massachusetts Form 1, Line 31, or 1 NR/PY, Line 36;
  2. multiply by (.6666) 66.66%;
  3. subtract estimated payments and withholding;
  4. net amount;
  5. multiply by applicable percentage;
  6. underpayment penalty due.


Certain Credits
mean Limited Income Credit, Earned Income Credit and Senior Circuit Breaker Credit.

The period of the underpayment runs from the due date of the installment to the due date of the tax return which is the 15th day of the fourth month following the close of the taxable year. Note: If the 15th falls on a Saturday, Sunday or holiday, then the due date of the tax return would be the next business day.

Underpayment penalty rate is the current federal short-term interest rate plus four percentage points compounded daily. 

Underpayment penalty is calculated on either:

  • Form M-2210 pdf format of    Form M-2210  , Underpayment of Massachusetts Estimated Income Tax, which is the excess of the required installment, over the amount of the installment paid on or before the due date for the installments; or
  • Form M-2210A pdf format of    M-2210A.pdf  , Annualized Income Installment Worksheet


A quick calculation of penalty can also be computed by using the Interactive Calculator for Underpayment of Estimated Tax (M2210 Penalty)

Applicable percentages:

2006.05732 (5.732%)
2007.05673 (5.673%)
2008.04201 (4.201%)
2009.03325 (3.325%)
2010.02990 (2.990%)
2011.02862 (2.862%)
2012.02660 (2.660%)
2013.02660 (2.660%)

Exceptions and Waivers to Underpayment of Estimated Tax

No underpayment penalty is imposed if the taxpayer qualifies for one of the following exceptions:

  • the 2013 year income tax due after credits and withholding is $400 or less;
  • the taxpayer was a resident of Massachusetts for 12 months and was not liable for taxes during 2012; or
  • the estimated payments and withholding equal or exceed the 2012 tax, where the taxpayer was a resident for 12 months and a return was filed.

No underpayment penalty is imposed if one of the following waivers applies:

  • the underpayment was by reason of casualty, disaster or unusual circumstances; or
  • the taxpayer retired in the current or previous taxable year after reaching age 62 or the taxpayer became disabled during the taxable year and the underpayment was due to reasonable cause and not willful neglect.


Examples Where No Underpayment of Penalty Applies:

Example #1 - the income tax after credits and withholding is $400 or less

Wages= $45,000
Other income= $12,000
Total income= $57,000
Less: Deductions/exemptions= ( $10,400)
Taxable income= $46,600
Tax= $2,447
Withholding= ($2,150)
Tax due= $297


Example #2 - taxpayer was a resident of Massachusetts for 12 months and was not liable for taxes during the prior year.

Prior year tax was $0

Wages= $35,000
Other income= $2,000
Total income= $37,000
Less: Deductions/exemptions= $6,400
Taxable income= $30,600
Tax= $1,607
Withholding= ($1,085)
Tax due= $522


Example #3 - taxpayers estimated payments and withholding equal or exceed the prior year tax.

Prior year tax was $2,275

Wages= $55,000
Other income= $15,000
Total income= $70,000
Less: Deductions/exemptions= ($12,800)
Taxable income= $57,200
Tax= $3,003
Withholding= ($2,400)
Tax due= $603


Prior Year Safe Harbor Provision:
There is no safe harbor provision for 1st year filers of a fiduciary, corporate trust or non-profit organization return. This means that entities may not base the current year estimated tax payments on the prior year if the entities did not exist in the prior year.


Farmers and Fishermen - Special Provisions

In addition to the exceptions and waivers of underpayment of estimated tax as stated above, there is also no underpayment penalty for qualified farmers and fishermen who:
 

  • file and pay the full amount of tax due on or before March first of the year the return is due.

Where to Report on Original Tax Return; What to Enclose:

Complete and enclose Form M-2210 pdf format of    Form M-2210  or Form M-2210A pdf format of    M-2210A.pdf  .

Note: Form M-2210 does not have to be completed if the balance due with the tax return is $400 or less. 

  • If penalty is due, calculate the amount to be included in the box under Line 45; this amount is then added to the tax due amount in Line 47 of Form 1 or Line 52 on Form 1-NR/PY. A quick calculation of penalty can also be computed by using the Interactive Calculator for Underpayment of Estimated Tax (M2210 Penalty);
  • If taxpayer meets one of the exceptions, he or she should fill in the oval marked "EX" under Line 47 on Form 1 or Line 52 on Form 1-NR/PY and indicate on the form which of the exceptions applies to his or her circumstances;
  • If taxpayer meets one of the waivers, he or she should fill in the oval marked "EX" under Line 47 on Form 1 or Line 52 on Form 1-NR/PY and provide an explanatory statement with the return.

Documentation to Submit with Abatement/Amended Tax Return:

  • If taxpayer qualifies for an Exception to the Underpayment Penalty, check the appropriate box under the "Exceptions" on Massachusetts Form M-2210, Underpayment of Massachusetts Estimated Income Tax, or attach a statement supporting why you meet the exceptions of 14(d).
  • If taxpayer qualifies for Waiver of Underpayment Penalty, complete Part 2, Figuring Your Underpayment, on Massachusetts Form M-2210, and write "WAIVER" in the appropriate box(es) in line 13. An explanation why claiming the waiver should be attached.
  • If taxpayer qualifies to Estimate Tax for Annualized Income, complete Massachusetts Form M-2210A, Annualized Income Installment Worksheet. Taxpayer should bear in mind that this method may result in a larger penalty on Form M-2210.

Massachusetts References: