1. Taxes are due as income is earned. For example, an individual who earns a significant amount of income in a given year must, by both federal and DC law, pay tax on that income as it is earned, rather than waiting until the next year, when the return is filed on April 15. Therefore, if your annual tax liability is not fully covered by withholding, or if you have no withholding, you must make quarterly estimated tax payments. OTR will not charge a penalty if these required estimated payments are made on time and the amount owed at the end of the year is less than $100.
2. If your income is regular throughout the year, and you are not covered by withholding, then you would make four equal quarterly payments of estimated tax. However, if you tend to receive the bulk of your income late in the tax year, you are better off using the annualized income method and filing a completed Form D-2210 with your annual return. The annualized income method allows you to make estimated payments based on the actual percentage of annual income received in a given quarter.
3. Form D-2210 helps you calculate your required quarterly estimated tax payments, plus any penalties resulting from underpayment of these required quarterly payments. There are two keys to understanding the D-2210:
- For most taxpayers (whose income is regular throughout the year) your total payment for each quarter (the total of withholding plus estimated tax payments) must equal 25 percent of either: (1) 90 percent of the current year’s tax obligation, or (2) 100 percent of last year’s tax obligation for the entire 12-month period. Note: You must have been a DC resident for the entire 12-month prior year to use provision (2).
- You will note in Form D-2210 that both required payments and actual payments made are treated cumulatively. In other words, you must pay 25 percent of your obligation by the first quarter, 50 percent by the second quarter, 75 percent by the third quarter, and 100 percent by the fourth quarter.
4. You should not fill out Form D-2210 unless it is to your advantage to do so. For example, if your income is regular throughout the year, it is not necessary to calculate your own underpayment penalty – OTR can do it for you and send you a bill. However, since OTR's computerized tax system assumes four equal quarterly payments, you would definitely benefit from filling out Form D-2210, using the annualized income method, if most of your income tends to be received late in the year. You may also fill out Form D-2210 if you think OTR has miscalculated your bill.
5. Send the completed Form D-2210, along with your notice of tax due and any payment due with your return. If you are mailing it after receiving a Notice of Penalty Assessment, send it to:
Office of Tax and Revenue
941 N. Capitol Street, NE, 6th floor
Washington, DC 20002-4265
Attn: Estimated Tax Penalty Adjustment
