In 2005 the Office of Tax and Revenue (OTR) began to automatically assess an Underpayment of Estimated Tax Interest for any person, financial institution or business that fails to pay legally required estimated tax payments. This change took effect January 1, 2005 for all returns for tax year 2004 and forward.
OTR will automatically charge 10 percent interest, compounded daily, on any underpayment of estimated taxes. To avoid this interest, taxpayers should remember the following instructions when filing District returns and when planning for future tax years:
Individuals Income Taxpayers:
Estimated Tax Requirement
You must pay quarterly DC estimated tax if:
- You live in DC and your gross income isn’t fully withheld, and
- You expect your DC tax liability will be greater than $100.00.
If you are required to remit estimated tax payments, use Estimated Payment for Individual Income Tax vouchers (Form D‑40ES) to submit your payments by the following deadlines:
- April 15; and
- June 15; and
- September 15; and
- January 15; or equivalent fiscal periods.
D-40ES vouchers for the current tax year can be found online by navigating to the “Forms” menu, or by visiting MyTax.DC.gov to remit your payment electronically.
Safe Harbors
Underpayment of Estimated Tax Interest will not be assessed for individuals where:
- Your current year’s tax liability is less than $100.00, or
- There was no DC tax liability for the preceding tax year, or
- 90% of your current year’s tax liability has been satisfied; or
- 110% of your prior year’s tax liability (if you were a full-year resident) has been satisfied through estimated tax payments or withholding.
Calculating your Underpayment of Estimated Tax Interest
Use form D-2210 to calculate you’re the Underpayment of Estimated Tax Interest for individuals.
If your income is irregular, or different for each period, you may use Form D‑2210 to compute quarterly installments based on actual income timing. Check the “Annualized Income” method box if applicable.
Businesses Taxpayers:
General Requirement
Every corporation, financial institution, and unincorporated business required to file a DC tax return must pay estimated taxes if the tax liability for the year is more than $1,000.00.
Estimated tax payments can be remitted by corporations using Declaration of Estimated Franchise Tax for Corporations vouchers (form D‑20ES), and unincorporated businesses can us Declaration of Estimated Franchise Tax for Unincorporated Businesses vouchers (form D‑30ES) by navigating to the “Forms” menu, or by visiting MyTax.DC.gov to remit its payment electronically. Estimated tax payments are due:
Calendar Year Filers:
- April 15; and
- June 15; and
- September 15
- December 15
Fiscal Filers:
- The fifteenth day of the fourth month of your taxable year;
- The fifteenth day of the sixth month of your taxable year;
- The fifteenth day of the ninth month of your taxable year; and
- The fifteenth day of the twelfth month of your taxable year.
Safe Harbor & Penalty
Underpayment of Estimated Tax Interest will not be assessed for businesses where:
- Your current year’s tax liability is less than $1,000.00, or
- There was no DC franchise tax liability for the preceding tax year, or
- Your total DC estimated franchise payments are equal to or greater than 110% of your preceding year’s tax liability or;
- Your remaining tax due after totaling all credits and estimated tax payments is less than 10% of your total DC franchise tax liability for the year.
Calculating your Underpayment of Estimated Tax Interest
Use form D-2210 to calculate you’re the Underpayment of Estimated Tax Interest for individuals.
If your businesses income is irregular, or different for each period, you may use Form D‑2220 to compute quarterly installments based on actual income timing. Check the “Annualized Income” method box if applicable.
If you have questions about estimated tax requirements, contact the OTR’s Customer Service Administration at (202) 727-4829.