Instructions for Form N-220 "Underpayment of Estimated Tax by Corporations and S Corporations" - Hawaii

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INSTRUCTIONS
STATE OF HAWAII—DEPARTMENT OF TAXATION
FORM N-220
INSTRUCTIONS FOR FORM N-220
(REV. 2020)
Underpayment of Estimated Tax by Corporations
and S Corporations
Purpose of Form
(increased by any reduction recaptured under IRC section 6655(e)(1)(B)).
If the corporation is using only the annualized income installment method,
Form N-220 is used by corporations, S corporations, and tax-exempt organi-
it must check box a of Part I and complete Parts I and III of Schedule A. If
zations subject to the unrelated business income tax, to determine whether
the corporation is using only the adjusted seasonal installment method, it
they paid enough estimated income tax, whether they are subject to the pen-
must check box b of Part I and complete Parts II and III of Schedule A. If
alty for underpayment of estimated tax, and, if so, the amount of the pen-
the corporation is using both methods, it must check boxes a and b of Part I
alty due. The estimated tax is a corporation’s or S corporation’s expected
and complete all three parts of Schedule A. Enter the amount from the cor-
income tax liability minus the allowable tax credits and look-back interest for
responding column of line 38, Part III, Schedule A, in each column on line 7
completed long-term contracts included in the expected income tax liability.
of Form N-220.
A domestic corporation must make estimated tax payments if it can reason-
Box c. If the corporation is a “large corporation,” check box c. A “large cor-
ably expect its estimated tax to be $500 or more. A foreign corporation must
make estimated tax payments if 15% or more of the corporation’s business
poration” is a corporation (other than an S corporation) that had, or its pre-
(entire gross income) for the taxable year will be attributable to Hawaii. The
decessor had, taxable income of $1 million or more for any of the three tax
Department of Taxation may excuse the filing of an estimate and payment of
years immediately preceding the current tax year. For this purpose, taxable
estimated taxes if it is satisfied that less than 15% of the foreign corporation’s
income is modified to exclude net operating loss or capital loss carrybacks
business for the taxable year will be attributable to the State.
or carryovers.
Part II. Figuring the Underpayment
Form N-220 includes the annualized income installment method and the
adjusted seasonal installment method. These estimated tax computation
Complete lines 1 through 15 of Part II.
methods are incorporated in the Schedule A section. Under the annualized
Line 1. — Enter the tax from line 11, Form N-30; sum of lines 22(a) and 22(b),
income installment method, a corporation or S corporation has three sets
of periods over which it may annualize income. If the taxpayer is making an
Form N-35; or line 16, Form N-70NP.
election to use one of the optional annualization periods for State estimated
Line 2a. — Complete the worksheet below to determine the amount to enter
tax purposes, a copy of the completed federal Form 8842 must be submitted
on line 2a. Do not include on the worksheet lines below estimated taxes paid,
to the Department of Taxation on or before the due date of the first required
credit for taxes withheld on the sale or disposition of Hawaii real property, the
installment payment.
amount withheld by an S corporation for a nonresident shareholder, or an
Who Must Pay the Underpayment Penalty
overpayment from the prior year to be applied to the current year’s tax liability.
Enter the amount of the applicable credit(s) from the income tax return on the
Generally, a corporation is subject to the penalty if the tax shown on its 2020
appropriate line below:
CREDIT
AMOUNT
tax return is $500 or more and it did not timely pay the smaller of:
1. The tax shown on its 2020 return, or
Carryover of the Energy Conservation Tax Credit
Enterprise Zone Tax Credit ..................................
2. The tax shown on its 2019 return if the 2019 return it filed showed
some amount of tax and the return was for a full 12 month period.
Low-Income Housing Tax Credit ..........................
Credit for Employment of Vocational Rehabilitation Referrals
A “large corporation,” however, may base only its first required tax installment
on the prior year’s tax liability. In these instructions, “return” refers to the cor-
Carryover of the High Technology Business
poration’s original tax return. An amended return is considered the original
Investment Tax Credit ......................................
return if the amended return is filed by the due date (including extensions) of
Carryover of the Individual Development Account
the original return.
Contribution Tax Credit ....................................
The penalty is figured separately for each installment due date. Therefore, the
Carryover of the Technology Infrastructure
corporation may owe a penalty for an earlier due date, even if the corporation
Renovation Tax Credit ......................................
paid enough tax later to make up the earlier underpayment of tax. This is true
even if the corporation is due a refund when its return is filed. A corporation
Credit for School Repair and Maintenance ..........
may be able to reduce or eliminate the penalty by using the annualized in-
Carryover of the Hotel Construction & Remodeling Tax Credit
come installment method or the adjusted seasonal installment method.
Carryover of the Residential Construction and
How To Use This Form
Remodeling Tax Credit .....................................
Carryover of the Renewable Energy Technologies
Check one or more boxes (a, b, or c) in Part I if the corporation uses the annu-
Income Tax Credit (For Systems Installed and
alized income installment method, the adjusted seasonal installment method,
Placed in Service Before July 1, 2009) ..........
or the corporation is a “large corporation.”
Renewable Energy Technologies Income Tax
Complete Part II of Form N-220 to determine the underpayment for any of the
Credit (Nonrefundable) ....................................
four installment due dates. If there is an underpayment on line 14 (column
Capital Infrastructure Tax Credit ..........................
(a), (b), (c), or (d)), go to Part III of the form to compute the penalty. Attach
Form N-220 to the income tax return and check the box on line 17, page 1 of
Cesspool Upgrade, Conversion or Connection
Form N-30; line 24 of Form N-35; or line 22 of Form N-70NP.
Income Tax Credit ............................................
Part I. Reason for Filing
Renewable Fuels Production Tax Credit ..............
Box a and b. Annualized income installment method and/or adjusted sea-
Organic Foods Production Tax Credit ..................
sonal installment method. If the corporation’s income varied during the year
Historic Preservation Income Tax Credit ..............
because, for example, it operated its business on a seasonal basis, it may be
Capital Goods Excise Tax Credit .........................
able to lower or eliminate the amount of one or more required installments
Fuel Tax Credit for Commercial Fishers ...............
by using the annualized income installment method or the adjusted seasonal
installment method. The annualized income installment or adjusted seasonal
Motion Picture, Digital Media and Film
installment may by less than the required installment under the regular meth-
Production Income Tax Credit .........................
od for one or more due dates. This will reduce or eliminate the penalty for
Renewable Energy Technologies Income Tax
those installment due dates.
Credit (Refundable) ..........................................
To use one or both of these methods to figure one or more required install-
Important Agricultural Land Qualified
ments, use Schedule A of Form N-220. If Schedule A is used for any payment
Agricultural Cost Tax Credit .............................
due date, it must be used for all payment due dates. To arrive at the amount
Tax Credit for Research Activities ........................
of each required installment, Schedule A automatically selects the smallest
of: (a) the annualized income installment, (b) the adjusted seasonal install-
Total Credits to be entered on line 2a ..................
ment, if applicable, or (c) the regular installment under IRC section 6655(d)
Clear Form
INSTRUCTIONS
STATE OF HAWAII—DEPARTMENT OF TAXATION
FORM N-220
INSTRUCTIONS FOR FORM N-220
(REV. 2020)
Underpayment of Estimated Tax by Corporations
and S Corporations
Purpose of Form
(increased by any reduction recaptured under IRC section 6655(e)(1)(B)).
If the corporation is using only the annualized income installment method,
Form N-220 is used by corporations, S corporations, and tax-exempt organi-
it must check box a of Part I and complete Parts I and III of Schedule A. If
zations subject to the unrelated business income tax, to determine whether
the corporation is using only the adjusted seasonal installment method, it
they paid enough estimated income tax, whether they are subject to the pen-
must check box b of Part I and complete Parts II and III of Schedule A. If
alty for underpayment of estimated tax, and, if so, the amount of the pen-
the corporation is using both methods, it must check boxes a and b of Part I
alty due. The estimated tax is a corporation’s or S corporation’s expected
and complete all three parts of Schedule A. Enter the amount from the cor-
income tax liability minus the allowable tax credits and look-back interest for
responding column of line 38, Part III, Schedule A, in each column on line 7
completed long-term contracts included in the expected income tax liability.
of Form N-220.
A domestic corporation must make estimated tax payments if it can reason-
Box c. If the corporation is a “large corporation,” check box c. A “large cor-
ably expect its estimated tax to be $500 or more. A foreign corporation must
make estimated tax payments if 15% or more of the corporation’s business
poration” is a corporation (other than an S corporation) that had, or its pre-
(entire gross income) for the taxable year will be attributable to Hawaii. The
decessor had, taxable income of $1 million or more for any of the three tax
Department of Taxation may excuse the filing of an estimate and payment of
years immediately preceding the current tax year. For this purpose, taxable
estimated taxes if it is satisfied that less than 15% of the foreign corporation’s
income is modified to exclude net operating loss or capital loss carrybacks
business for the taxable year will be attributable to the State.
or carryovers.
Part II. Figuring the Underpayment
Form N-220 includes the annualized income installment method and the
adjusted seasonal installment method. These estimated tax computation
Complete lines 1 through 15 of Part II.
methods are incorporated in the Schedule A section. Under the annualized
Line 1. — Enter the tax from line 11, Form N-30; sum of lines 22(a) and 22(b),
income installment method, a corporation or S corporation has three sets
of periods over which it may annualize income. If the taxpayer is making an
Form N-35; or line 16, Form N-70NP.
election to use one of the optional annualization periods for State estimated
Line 2a. — Complete the worksheet below to determine the amount to enter
tax purposes, a copy of the completed federal Form 8842 must be submitted
on line 2a. Do not include on the worksheet lines below estimated taxes paid,
to the Department of Taxation on or before the due date of the first required
credit for taxes withheld on the sale or disposition of Hawaii real property, the
installment payment.
amount withheld by an S corporation for a nonresident shareholder, or an
Who Must Pay the Underpayment Penalty
overpayment from the prior year to be applied to the current year’s tax liability.
Enter the amount of the applicable credit(s) from the income tax return on the
Generally, a corporation is subject to the penalty if the tax shown on its 2020
appropriate line below:
CREDIT
AMOUNT
tax return is $500 or more and it did not timely pay the smaller of:
1. The tax shown on its 2020 return, or
Carryover of the Energy Conservation Tax Credit
Enterprise Zone Tax Credit ..................................
2. The tax shown on its 2019 return if the 2019 return it filed showed
some amount of tax and the return was for a full 12 month period.
Low-Income Housing Tax Credit ..........................
Credit for Employment of Vocational Rehabilitation Referrals
A “large corporation,” however, may base only its first required tax installment
on the prior year’s tax liability. In these instructions, “return” refers to the cor-
Carryover of the High Technology Business
poration’s original tax return. An amended return is considered the original
Investment Tax Credit ......................................
return if the amended return is filed by the due date (including extensions) of
Carryover of the Individual Development Account
the original return.
Contribution Tax Credit ....................................
The penalty is figured separately for each installment due date. Therefore, the
Carryover of the Technology Infrastructure
corporation may owe a penalty for an earlier due date, even if the corporation
Renovation Tax Credit ......................................
paid enough tax later to make up the earlier underpayment of tax. This is true
even if the corporation is due a refund when its return is filed. A corporation
Credit for School Repair and Maintenance ..........
may be able to reduce or eliminate the penalty by using the annualized in-
Carryover of the Hotel Construction & Remodeling Tax Credit
come installment method or the adjusted seasonal installment method.
Carryover of the Residential Construction and
How To Use This Form
Remodeling Tax Credit .....................................
Carryover of the Renewable Energy Technologies
Check one or more boxes (a, b, or c) in Part I if the corporation uses the annu-
Income Tax Credit (For Systems Installed and
alized income installment method, the adjusted seasonal installment method,
Placed in Service Before July 1, 2009) ..........
or the corporation is a “large corporation.”
Renewable Energy Technologies Income Tax
Complete Part II of Form N-220 to determine the underpayment for any of the
Credit (Nonrefundable) ....................................
four installment due dates. If there is an underpayment on line 14 (column
Capital Infrastructure Tax Credit ..........................
(a), (b), (c), or (d)), go to Part III of the form to compute the penalty. Attach
Form N-220 to the income tax return and check the box on line 17, page 1 of
Cesspool Upgrade, Conversion or Connection
Form N-30; line 24 of Form N-35; or line 22 of Form N-70NP.
Income Tax Credit ............................................
Part I. Reason for Filing
Renewable Fuels Production Tax Credit ..............
Box a and b. Annualized income installment method and/or adjusted sea-
Organic Foods Production Tax Credit ..................
sonal installment method. If the corporation’s income varied during the year
Historic Preservation Income Tax Credit ..............
because, for example, it operated its business on a seasonal basis, it may be
Capital Goods Excise Tax Credit .........................
able to lower or eliminate the amount of one or more required installments
Fuel Tax Credit for Commercial Fishers ...............
by using the annualized income installment method or the adjusted seasonal
installment method. The annualized income installment or adjusted seasonal
Motion Picture, Digital Media and Film
installment may by less than the required installment under the regular meth-
Production Income Tax Credit .........................
od for one or more due dates. This will reduce or eliminate the penalty for
Renewable Energy Technologies Income Tax
those installment due dates.
Credit (Refundable) ..........................................
To use one or both of these methods to figure one or more required install-
Important Agricultural Land Qualified
ments, use Schedule A of Form N-220. If Schedule A is used for any payment
Agricultural Cost Tax Credit .............................
due date, it must be used for all payment due dates. To arrive at the amount
Tax Credit for Research Activities ........................
of each required installment, Schedule A automatically selects the smallest
of: (a) the annualized income installment, (b) the adjusted seasonal install-
Total Credits to be entered on line 2a ..................
ment, if applicable, or (c) the regular installment under IRC section 6655(d)
INSTRUCTIONS
FORM N-220 (REV. 2020)
PAGE 2
Schedule A
Line 4. — All filers other than S corporations. Figure the corporation’s
prior year’s tax in the same manner as the amount on line 3 of Form N-220
Part I — Annualized Income Installment Method
was determined, using the taxes and credits from the prior year’s tax return.
Skip line 4 and enter the amount from line 3 on line 5 if either of the follow-
Line 1. — Enter in the space on line 1, columns (a) through (d), respec-
ing applies:
tively, the annualization period that the corporation used. A corporation or S
corporation electing to use Option 1 or Option 2 periods and a tax exempt
1. The corporation did not file a tax return for the prior year that
organization subject to the unrelated business income tax using the Option
showed a liability for at least some amount of tax; or
1 must have timely submitted a copy of the election form, federal Form 8842,
2. The corporation had a prior tax year of less than 12 months.
Election To Use Different Annualization Periods For Corporate Estimated Tax
S Corporations. Enter on line 4 the sum of: (a) 100% of the built-in
with the Department of Taxation. Otherwise, the Standard option for the ap-
gains tax shown on the return for the tax year and (b) 100% of any excess
plicable entity must be used. The Standard option may be used without filing
net passive income tax shown on the S corporation’s tax return for the prior
federal Form 8842. Option 2 is not available to tax exempt organizations and
tax year. If the prior tax year was less than 12 months, do not complete line
private foundations.
4. Instead, enter the amount from line 3 on line 5.
CAUTION: Use Option 1 or Option 2 only if the corporation elected to do so
Line 7. — Required Installments. If Part I does not apply, enter 25% of line
by submitting a copy of the federal Form 8842 on or before the due date of
5 in each column on line 7.
the first required installment payment. Once made, the election is irrevocable
for the particular tax year.
If Part I, box c (but not box a or b) applies and line 3 is smaller than line 4,
Standard option for corporations. — Enter “3” in columns (a) and (b),
enter 25% of line 3 in columns (a) through (d) of line 7.
“6” in column (c), and “9” in column (d).
If Part I, box c (but not box a or b) applies and line 4 is smaller than line 3,
Standard option for tax exempt organizations subject to the
enter 25% of line 4 in column (a) of line 7. In column (b) of line 7, figure the
unrelated business income tax. — Enter “2” in column (a), “3” in column
amount to enter as follows:
(b), “6” in column (c), and “9” in column (d).
1. Subtract line 4 from line 3.
Option 1 for all organizations. — Enter “2” in column (a), “4” in column
2. Add the result to the amount on line 3.
(b), “7” in column (c), and “10” in column (d).
Option 2 for corporations. — Enter “3” in column (a), “5” in column (b),
3. Multiply the total in number 2 above by 25% and enter the result
on line 7, column (b). On line 7, column (c) and (d), enter 25% of
“8” in column (c), and “11” in column (d).
line 3.
Line 3. — Enter the annualization amount for the option used on line 1
If Part I, box a or b and box c apply, follow the above instructions by substi-
above.
tuting the amounts from Schedule A, line 35 for line 7 and completing the
Standard option for corporations. — Enter “4” in columns (a) and (b),
remainder of the lines in Part III of Schedule A.
“2” in column (c), and “1.33333” in column (d).
Line 8. — Enter the estimated tax payments made by the corporation for its
Standard option for tax exempt organizations subject to the
tax year, as indicated below:
unrelated business income tax. — Enter “6” in column (a), “4” in column
In column (a), enter the estimated tax payments made by the 20th day
(b), “2” in column (c), and ”1.33333” in column (d).
of the 4th month of the corporation’s tax year. Private foundations
Option 1 for all organizations. — Enter “6” in column (a), “3” in column
enter payments made by the 20th day of the 5th month.
(b), “1.71429” in column (c), and “1.2” in column (d).
In column (b), enter payments made after the 20th day of the 4th
Option 2 for corporations. — Enter “4” in column (a), “2.4” in column
month through the 20th day of the 6th month of the tax year.
(b), “1.5” in column (c), and “1.09091” in column (d).
Private foundations enter payments made after the 20th day of
the 5th month through the 20th day of the 6th month.
Line 6. — Enter the amount from Form N-30, Schedule J, line 22, or the total
In column (c), enter payments made after the 20th day of the 6th
of the amounts from Form N-70NP, lines 11 through 15. Otherwise, enter -0-.
month through the 20th day of the 9th month of the tax year.
Line 8. — Enter the tax credits allowed due to events that occurred during the
In column (d), enter payments made after the 20th day of the 9th
months shown in column headings used to figure annualized taxable income.
month through the 20th day of the 1st month following the close
Complete the tax credits based on Part II, line 2a.
of the tax year.
Part II — Adjusted Seasonal Installment Method
Include in the estimated tax payments any overpayment of tax from the
corporation’s prior year’s tax return that was credited to the corporation’s
The corporation may use the adjusted seasonal installment method only if
current year estimated tax.
the corporation’s base period percentage for any 6 consecutive months of
the tax year is 70% or more. The base period percentage for any period of 6
Line 14. — If any of the columns in line 14 shows an underpayment, com-
consecutive months is the average of the 3 percentages figured by dividing
plete Part III to figure the penalty.
the taxable income for the corresponding 6 consecutive month period in each
Part III. Figuring the Penalty
of the 3 preceding tax years by the taxable income for each of their respective
tax years.
Complete lines 16 through 21 to determine the amount of the penalty. The penalty is figured for
Example. An amusement park that has a calendar year as its tax year
the period of underpayment determined under section 235-97(f), HRS.
receives the largest part of its taxable income during the 6 month period
from May through October. To compute its base period percentage for the
The penalty at the rate of 8% a year is imposed on the amount of the under-
period May through October 2020, it must figure its taxable income for the
payment of estimated tax at the rate of 2/3 of 1% a month or part of a month.
period May through October in each of the years: 2017, 2018, and 2019.
A monthly factor of .00667 is used on the form.
The taxable income for each May through October period is then divided
Line 16. — A payment of estimated tax is applied against underpayments of
by the total taxable income for the tax year in which the period is included,
required installments in the order that installments are required to be paid,
resulting in the following quotients: .69 for May through October 2017, .74
regardless of which installment the payment pertains to.
for May through October 2018, and .67 for May through October 2019. Since
the average of .69, .74, and .67 is equal to .70, the base period percentage
Line 19. — Count the number of months from the due date of the installment
for May through October 2020 is 70%. Therefore, the amusement park
payment on line 17 to the date shown on line 18. Enter the number of months,
qualifies for the adjusted seasonal installment method.
rounding up any fractions of a month. A fraction of a month is counted as one
month.
Line 28. — Enter the same amount as Schedule A, line 6.
For example, a corporation has an underpayment for the April 20
Line 30. — Enter the tax credits the corporation is entitled to for the months
installment of $1,000. The June 20 installment requires a payment of
$2,500. On June 10, the corporation deposits $2,500 to cover the June 20
shown in each column.
installment. However, $1,000 of this payment is considered to be for the
Part III — Required Installments
April 20 installment. The penalty for the April 20 installment is figured to
Line 33. — Before completing line 33 in columns (b) through (d), complete
June 10 (2 months). The payment to be applied to the June 20 installment
will then be $1,500.
lines 34 through 38 in each of the preceding columns. For example, complete
lines 34 through 38 for column (a) before completing line 33 in column (b).
If the corporation has made more than one payment for a required
installment, attach a separate computation for each payment.
Page of 2