The Indiana income tax system is a “pay-as-you-go” system. Many taxpayers have enough taxes withheld from their income throughout the year to cover their year-end total tax due. Additionally, some taxpayers may choose to make estimated tax payments to reduce the amount due when filing an income tax return. However, if you don’t have taxes withheld from your income, or if you don’t have enough tax withheld from your income, you may owe a penalty for underpaying estimated tax.
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 make estimated tax payments throughout the year.
Estimated tax installment payments are due on:
- April 15
- June 15
- Sept. 15
- Jan. 15 of the following year.
If the due date falls on a national or state holiday, Saturday, or Sunday, then payment should be made online or postmarked by the next business day.
Estimated tax installment payments may be made by one of the following methods:
- Using a preprinted estimated tax voucher issued by the Indiana Department of Revenue (DOR) for taxpayers with a history of paying estimated tax;
- Paying online; or
- Completing Form ES-40 and mailing it with your payment.
You can find your amount due and pay online using the intime.dor.in.gov electronic payment system.
Penalties for underpayment of estimated taxes
You may owe this penalty if you are required to make estimated tax payments and:
- You didn’t make any estimated tax payments;
- You didn’t pay enough estimated tax;
- You didn’t make your payments on time; or
- The total of your credits, including estimated tax payments, is less than 90% of this year’s tax due or 100% of last year’s tax due (110% of last year’s tax if your federal adjusted gross income is more than $150,000 if you are a single filer or married filing jointly, or more than $75,000 if you are married filing separately).
DOR assesses a penalty of 10% of the underpayment amount for each installment period.
If any of these situations apply to you, you must complete Schedule IT-2210 or IT-2210A.
The Schedule IT-2210 is used for one of two reasons:
- To help you figure any penalty you owe for not paying enough tax throughout the year, or
- To show you paid enough tax throughout the year to be exempt from the penalty.
You should complete the Schedule IT-2210 if:
- The amount you owe for the tax year, after credits, is $1,000 or more. The amount you owe is from Form IT-40 and Form IT-40PNR, line 15 minus line 14, or
- You underpaid the minimum amount due for one or more of the installment periods. This is true even if you are due a refund.
Individuals who are required to pay estimated taxes must make evenly distributed payments throughout the year. However, in situations where a taxpayer’s income is distributed unevenly, the taxpayer can avoid the penalty by paying an annualized income installment amount. This allows the taxpayer to make reduced payments during a time when their income is lower, then pay the remainder when their income is higher. Use Schedule IT-2210A to compute the annualized income installment amount.
Farmers and Fisherman
Farmers and fishermen have special filing considerations. If at least two-thirds (2/3) of your gross income is from farming or fishing, refer to Information Bulletin #3 and Schedule IT-2210 for penalty information.