Small Tax Liability Exception

§ 6654. Failure by individual to pay estimated income tax(a) Addition to the taxExcept as otherwise provided in this section, in the case of any underpayment of estimated tax by an individual, there shall be added to the tax under chapter 1, the tax under chapter 2, and the tax under chapter 2A for the taxable year an amount determined by applying—(1) the underpayment rate established under section 6621, (2) to the amount of the underpayment, (3) for the period of the underpayment. (b) Amount of underpayment; period of underpaymentFor purposes of subsection (a)—(1) AmountThe amount of the underpayment shall be the excess of—(A) the required installment, over (B) the amount (if any) of the installment paid on or before the due date for the installment. (2) Period of underpaymentThe period of the underpayment shall run from the due date for the installment to whichever of the following dates is the earlier—(A) the 15th day of the 4th month following the close of the taxable year, or (B) with respect to any portion of the underpayment, the date on which such portion is paid. (3) Order of crediting paymentsFor purposes of paragraph (2)(B), a payment of estimated tax shall be credited against unpaid required installments in the order in which such installments are required to be paid. (c) Number of required installments; due datesFor purposes of this section—(1) Payable in 4 installmentsThere shall be 4 required installments for each taxable year. (2) Time for payment of installments   In the case of the following   required installments:The due date is:   1stApril 15   2ndJune 15   3rdSeptember 15   4thJanuary 15 of the following taxable year. (d) Amount of required installmentsFor purposes of this section—(1) Amount(A) In generalExcept as provided in paragraph (2), the amount of any required installment shall be 25 percent of the required annual payment. (B) Required annual paymentFor purposes of subparagraph (A), the term “required annual payment” means the lesser of—(i) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year), or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year. Clause (ii) shall not apply if the preceding taxable year was not a taxable year of 12 months or if the individual did not file a return for such preceding taxable year. (C) Limitation on use of preceding year’s tax(i) In generalIf the adjusted gross income shown on the return of the individual for the preceding taxable year beginning in any calendar year exceeds $150,000, clause (ii) of subparagraph (B) shall be applied by substituting “110 percent” for “100 percent”.