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2. Section 6654
Section 6654 provides for an addition to tax in the event of
an underpayment of a required installment of individual estimated
tax. As relevant to these cases, each required installment of
estimated tax is equal to 25 percent of the “required annual
payment”, which in turn is equal to the lesser of (1) 90 percent
of the tax shown on the individual’s return for that year (or, if
no return is filed, 90 percent of his or her tax for such year),
or (2) if the individual filed a return for the immediately
preceding taxable year, 100 percent of the tax shown on that
return. Sec. 6654(d)(1)(B)(i) and (ii). The due dates of the
required installments for a calendar taxable year are April 15,
June 15, and September 15 of that year and January 15 of the
following year. Sec. 6654(c)(2). For purposes of section 6654,
an individual’s tax consists of income tax and self-employment
tax and is determined before the application of any wage
withholding credit7 (but after the application of other allowable
credits). Sec. 6654(f); see sec. 31.
There are two mechanical exceptions to the applicability of
the section 6654 addition to tax. First, as relevant to these
cases, the addition is not applicable if the tax shown on the
individual’s return for the year in question (or, if no return is
filed, the individual’s tax for that year), reduced for these
7 Under sec. 6654(g)(1), wage withholding credits are
treated as payments of estimated tax.
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