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 2012 Oregon income tax return, you must complete Oregon Form 10, Underpayment of Oregon Estimated Tax.

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 2012 tax return; or
• 100 percent of the tax shown on your timely filed 2011 Oregon return (commonly called Safe Harbor).

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.

2012 required installment due dates:

• April 17, 2012
• June 15, 2012
• September 17, 2012
• January 15, 2013

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 1—Farmers and commercial fishermen. If at least two-thirds (66.7 percent) of your 2011 or 2012 gross income is from farming or fishing, you will not have to pay underpayment interest.

Exception 2—Prior 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 2011, 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 2011.

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

Exception 3—You retired at age 62 or older or became disabled in 2011 or 2012, and your underpayment was for a reasonable cause. Include a statement with your return explaining the cause to be considered for the exception.

Exception 4—Underpayment 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 2012, or
• You were a part-year resident for 2011.

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