I Have Followed the Dbu Honor Code While Doing This Assignment

Research Project #1

"I have followed the DBU Honor Code while doing this assignment."

Section 6655(d)(1) discuss the payment amounts a corporation must pay in regards to their estimated income tax. Section 6655(d)(1) says that when a corporation has to make an estimated tax installment payment, the installment payment must be 25% of the total annual amount that the corporation is taxed. For example, if Corporation A has an estimated tax payment of $100,000.00, their installment payment has to be 25%, or $25,000.00. The annual tax payment is either 100% of the tax shown on the corporation’s tax return or, if no return was filed, the annual tax payment will be 100% of the tax for that year. The only clause that is in Section 6655(d)(1) is if the corporation’s taxable year is not a 12-month year, if this is true, then paying 25% of the annual tax payment does not apply.

The issues that are raised in Revenue Rulings 86-58 deals with situations regarding section 6655(d)(1) applying to corporations that may have underpaid, overpaid, or filed amended returns that adjust the annual tax payment due. For example, if Michael B company filed an amended return that changed their old tax payment of $100,000.00 to $75,000.00. The issue is whether Michael B Company has to continue paying 25% of the $100,000.00 payment or will their payment of 25% be changed to the $75,000.00, and then what of the difference between the two installment payment plans? Will they be deducted from the new annual tax payment, or will it be deducted from their next tax return? These are the issues that are raised in Revenue Ruling 86-58 and answered.

The first issue that is addressed is what happens to the tax payments that a company has been paying when their actual tax amount due is less than what was originally filed. According to Section 6655(b), the amount that was paid to the overpayment tax becomes the excess of the installment amount that is now required to be paid. In regards to the tax amount due, Section 6655(d) explains that if the total amount of the tax installment payments is greater than the new tax amount due, then no additional tax installment payments will be imposed. However, if the company files the amended return after the due date the original return will be the legal one that will use Section 6655. If a corporation files a return and discovers an error or adjustment and then files an amended return before the due date, then the amended return will be used for Section 6655. For example, if Michael B Company failed to file the amended return before the due date, their original return with the $100,000.00 tax liability will remain the actual return with the original amount due. However, if they were to successfully file their amended return before the due date, then the $75,000.00 tax liability will take into effect. Thus the $25,000.00 tax installment payment is reduced to $18,750.00 and the $6,250.00 difference is reduced from the annual tax payment.