Estimated Income Tax Payments for Business Entities
Topics:
Business Income Tax Guidance
This page is intended as a general guide. For additional details reference Iowa Administrative Code Chapter 701-505.
The information on this page applies to:
C corporations
S Corporations subject to built-in gains tax, excess net passive income tax, or PTET
Partnerships subject to PTET
Financial Institutions subject to the franchise tax
Estimated income tax is just that – estimated. The taxpayer approximates what its income for the tax year will be, subtracts estimated allowable deductions, computes the tax, and pays it in installments throughout the year.
List items for Estimated Income Tax Payments for Business Entities
Taxpayers who reasonably expect that they will owe $1,000 or more in Iowa income tax must pay estimated tax. When the annual income tax return is filed, the prepaid estimated tax is credited against the actual tax liability.
C corporations
S Corporations subject to built-in gains tax, excess net passive income tax, or PTET
Partnerships subject to PTET
Financial Institutions subject to the franchise tax
Estimated payments are due in four installments on or before:
The last day of the fourth month following the beginning of the tax year
The last day of the sixth month following the beginning of the tax year
The last day of the ninth month following the beginning of the tax year
The last day of the twelfth month following the beginning of the tax year
When entering the “filing period” while making an estimated tax payment, enter the final day of the tax year, not the due date of the installment payment.
If income will be greater or less than initially estimated, subsequent estimated tax payments should be adjusted accordingly.
If a taxpayer has an Iowa income tax liability of $1,000 or more and fails to make adequate estimated payments a penalty for underpayment of estimated tax may apply. The penalty is computed on form IA 2220 ( find forms online).
Avoiding Penalty
Taxpayers may avoid the penalty for underpayment of estimated tax if any of the following requirements is met:
The current tax year payments, made on or before the due dates, are equal to or exceed the prior year’s tax liability. The prior year must cover a 12-month period. or
The current tax year payments, made on or before the due dates, are equal to or exceed the tax liability as calculated using the current year tax rates, applied to the taxpayer’s income for the immediately preceding year. or
The current year tax payments, made on or before the due dates, are equal to or exceed the tax on the current year's annualized taxable income, calculated as described in the instructions to form IA 2220.
This penalty cannot be waived and is not subject to the waiver reasons under Iowa Code section 421.27.
