Line D Withholding: A Comprehensive Guide

What is Line D Withholding?

Line D withholding refers to the portion of estimated tax payments that is considered to have been withheld from your income. This amount is reported on line 11d of Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

How is Line D Withholding Calculated?

For most taxpayers, line D withholding is calculated as one-fourth of the total federal income tax withheld from wages and other sources during the year. This amount is then multiplied by the number of estimated tax payments that have been made by the due date for each payment.

When is Line D Withholding Used?

Line D withholding is used to determine if you have paid enough estimated taxes throughout the year to avoid an underpayment penalty. If your line D withholding is less than the amount of estimated tax that you were required to pay, you may owe a penalty.

How to Avoid an Underpayment Penalty

To avoid an underpayment penalty, you must pay estimated taxes throughout the year that are equal to at least the lesser of:

• 90% of your current year’s tax liability, or
• 100% of your prior year’s tax liability (if your prior year’s return covered a 12-month period)

Special Rules for Certain Individuals

Different percentages are used for farmers and fishermen, and certain higher income taxpayers.

• Farmers and fishermen: If at least two-thirds of your gross income for the current or prior year is from farming and fishing, substitute 662/3% for 90% in the calculation above.
• Higher income taxpayers: If your adjusted gross income (AGI) for the prior year was more than $150,000 ($75,000 if married filing separately), substitute 110% for 100% in the calculation above.

Consequences of Underpaying Estimated Taxes

If you underpay your estimated taxes, you may owe a penalty. The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment.

Exceptions to the Penalty

You won’t have to pay the penalty if either of the following applies:

• You had no tax liability for the prior year, you were a U.S. citizen or resident alien for the entire year (or an estate of a domestic decedent or a domestic trust), and your prior year tax return was (or would have been had you been required to file) for a full 12 months.
• The total tax shown on your current year’s return minus the amount of tax you paid through withholding is less than $1,000.

Waiver of Penalty

The IRS may waive all or part of the penalty if they determine that:

• In the current or prior year, you retired after reaching age 62 or became disabled, and your underpayment was due to reasonable cause (and not willful neglect); or
• The underpayment was due to a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty.

How to File Form 2210

If you owe an underpayment penalty, you must file Form 2210 with your tax return. You can use the form to figure your penalty or have the IRS figure it for you. If you have an underpayment, all or part of the penalty for that underpayment will be waived if the IRS determines that:

• In 2022 or 2023, you retired after reaching age 62 or became disabled, and your underpayment was due to reasonable cause (and not willful neglect); or
• The underpayment was due to a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty.

Additional Resources

• IRS Instructions for Form 2210
• Intuit TurboTax: How to Deal with a Form 2210 Line D Withholding Error