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II. Additions to Tax
A. Section 6654
Section 6654 provides for an addition to tax (in the form of
an interest charge) in the event of an underpayment of a required
installment of individual estimated tax. See sec. 6654(a). As
relevant to this case, 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)(A) and (B). 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
credit4 (but after the application of other allowable credits).
Sec. 6654(f); see sec. 31. The due dates of the required
installments for a calendar taxable year are April 15, June 15,
3(...continued)
deficiency determined by respondent for that year. See sec.
6211(b)(2); Hillenbrand v. Commissioner, T.C. Memo. 2003-303
(nonrebatable erroneous refunds do not enter into determination
of deficiencies in taxpayers’ gift taxes); sec. 301.6211-1(f),
Proced. & Admin. Regs. (an amount refunded is not a rebate unless
the refund resulted from a substantive determination by the
Commissioner as to the taxpayer’s correct tax for that year).
4 Under sec. 6654(g)(1), wage withholding credits are
treated as payments of estimated tax.
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