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Interest on underpayment of estimated tax

Who must pay

If you were required to make estimated payments but paid less than the required amounts due by each payment date, you have an underpayment of estimated tax. Oregon charges interest on underpayment of the estimated tax due. If you owe $1,000 or more on your 2014 Oregon income tax return, you must complete Oregon Form 10, Underpayment of Oregon Estimated Tax.

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Figure your required annual payment

The required annual payment means the total amount of required installment payments for the tax year that is the lesser of:
  • 90 percent of the net tax shown on your 2014 tax return; or
  • 100 percent of the tax shown on your 2013 Oregon return (commonly called Safe Harbor).
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Figure your required installment payment

The required installment payment means the amount of the payment that is due for each payment period for the tax year using one of the following methods:
  • Regular installment—an amount, in each period, equal to 25 percent of the required annual payment; or
  • Annualized installment—the annualized amount that would be due only on the actual income earned in that period (this method may benefit taxpayers who don’t receive their income evenly throughout the year or part-year residents).
The total for the required installment payments must equal the required annual payment amount.

2014 required installment due dates:
April 15, 2014
June 16, 2014
September 15, 2014
January 15, 2015
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Exceptions to paying interest on an underpayment of estimated tax

If you meet an exception, you may not have to pay interest on your underpayment. Enter the exception number on your tax return if you meet one of the following exceptions; don’t use Form 10:

Exception 1Farmers and commercial fishermen. If at least two-thirds (66.7 percent) of your 2013 or 2014 gross income is from farming or fishing, you will not have to pay underpayment interest.

Exception 2Prior year. You do not need to pay interest on the underpayment of estimated tax if you met all of the following qualifications:

  • You had no Oregon tax liability* for 2013, or you were not required to file an Oregon return, and 
  • Your taxable year was a full 12-month period, and 
  • You were a full-year Oregon resident for 2013.

* Your Oregon tax liability is your liability after tax credits, but before withholding and estimated tax payments.

Exception 3You retired at age 62 or older or became disabled in 2013 or 2014, and your underpayment was for a reasonable cause. Include a statement with your return explaining the cause to be considered for the exception.

Exception 4Underpayment was due to a casualty, disaster, or other unusual circumstances, and it would be unfair to impose underpayment interest. Include a statement with your return explaining the unusual circumstance.*

* Unusual circumstance is not the same as reasonable cause.

Exception 5—First year S corporation shareholders who are nonresidents or were part-year residents. No interest is due on underpayment of S corporation income as a shareholder if:

  • The income is for the first year S corporation status is elected, and
  • You’re a nonresident for 2014, or
  • You were a part-year resident for 2013.

Keep a copy of your exception explanation with your tax records.

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