Large Corporation Estimated Tax: Installments, Form 2220, and EFTPS

A corporation that reported $1 million or more in federal taxable income in any of its three preceding tax years must make quarterly estimated tax payments based on a projection of its current-year liability, not on the prior year’s tax bill. These large corporation estimated tax payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year, must be deposited electronically, and must cumulatively reach 100% of the current year’s tax by year end. Missing any installment triggers a penalty that compounds daily at the federal short-term rate plus three points. That underlying rate was 7% for the first quarter of 2026 and 6% for the second.¹

When These Rules Apply to Your Corporation

A corporation is “large” for estimated tax purposes if it, or any predecessor, had taxable income of $1 million or more in any single year during the three-year testing period immediately before the current year.² The test looks at net taxable income reported to the IRS, not gross revenue or assets. For the 2026 tax year, that means checking 2025, 2024, and 2023. Hitting the threshold in even one of those years locks in large-corporation treatment for 2026.

The taxable income figure used for the test is calculated without regard to net operating loss carrybacks or capital loss carrybacks, so those carrybacks cannot pull historical income back under the $1 million line.² A newly formed corporation, or one that has consistently stayed below the threshold, can use the more flexible rules available to smaller entities.

Controlled Groups Split the $1 Million

Corporations in a controlled group don’t each get their own threshold. The $1 million is divided among the component members under rules similar to the Section 1561 bracket allocation.² The default is equal shares; all members can consent to a different allocation plan if that fits the group better.³

A subsidiary earning $400,000 on its own might think it falls well short of $1 million. In a five-member controlled group, its share of the threshold is only $200,000, making it a large corporation at that income. A taxable loss from one member during the testing period also cannot offset another member’s income for this calculation.³

How Each Quarterly Installment Is Calculated

Any corporation expecting to owe at least $500 at filing must make estimated payments.⁴ Most corporations can pay the lesser of 100% of current-year tax or 100% of the tax shown on the prior year’s return. That prior-year safe harbor gives smaller companies a predictable floor.

Large corporations lose almost all of that flexibility. The statute bars them from relying on prior-year tax except for one narrow purpose: the first installment of the year.² A large corporation may base installment one on 25% of prior-year tax, but any savings must be recaptured in the second installment.

Here’s how that works. Suppose prior-year tax was $4 million. Installment one based on prior year is $1 million. Midyear, the corporation now projects current-year liability at $8 million. By the second installment deadline, cumulative payments must reach 50% of $8 million, or $4 million. Because only $1 million has been paid, installment two jumps to $3 million. Installments two, three, and four must bring total payments to 100% of current-year tax by year end.²

The practical consequence: you need real-time financial visibility. Waiting until year end to figure out what you owe is not an option. Each installment demands a fresh projection, and underestimating at any point starts a penalty clock that runs until the shortfall is covered.

Using the Annualized Income Installment Method

Because large corporations must track current-year income anyway, many use the annualized income installment method to size each payment to income actually earned by that point in the year. This matters most when revenue is seasonal or volatile, because it avoids forcing equal quarterly payments based on an annual guess.

Under the standard annualization schedule, the measurement windows are:

First installment: first 3 months of income, annualized to a full year
Second installment: first 3 months (same window)
Third installment: first 6 months
Fourth installment: first 9 months

Two alternative sets of periods are available by election. The first alternative uses 2, 4, 7, and 10 months. The second uses 3, 5, 8, and 11 months.⁵ The right choice depends on when revenue and expenses concentrate in your fiscal year.

For each period, the corporation takes income earned through that window, scales it up to a twelve-month figure, and calculates the resulting tax. That tax is multiplied by a cumulative percentage: 25% for installment one, 50% for two, 75% for three, 100% for four. Payments already made are subtracted from the cumulative target.²

The method cuts both ways. Heavy early-year profits produce a steep annualized projection, and installment payments accelerate accordingly. Constant recalculation demands rigorous accounting and reliable income tracking at each measurement date. The computations are reported on Schedule A of Form 2220.⁶

Adjusted Seasonal Installment Method

A separate option exists for corporations whose income follows a consistent seasonal pattern year after year. The adjusted seasonal installment method is available when at least 70% of taxable income falls within any six consecutive months, based on a comparison to prior years.⁷ It is most useful in agriculture, tourism, and retail, where the bulk of revenue arrives in predictable windows.

Payment Due Dates

For a calendar-year corporation, the four installments are due April 15, June 15, September 15, and December 15.⁸ Fiscal-year corporations follow the same spacing: the 15th day of the 4th, 6th, 9th, and 12th months of their tax year.

When the 15th falls on a Saturday, Sunday, or legal holiday in the District of Columbia, the deadline moves to the next business day.⁸ Statewide holidays in some jurisdictions can shift it further. The four payments must cumulatively reach 100% of the required annual amount by the final due date.

Mandatory Electronic Deposits Through EFTPS

Large corporations almost always fall under the mandatory electronic deposit rule. Any corporation that deposits more than $200,000 in total federal depository taxes during a calendar year must use the Electronic Federal Tax Payment System (EFTPS) for all federal tax deposits going forward, including corporate estimated income tax.⁹ That threshold counts employment taxes and withheld income taxes, so any corporation with meaningful payroll typically crosses it.

Failing to use EFTPS when required carries a separate 10% penalty on the amount that should have been deposited electronically.¹⁰ This penalty is independent of any underpayment charge, so a deposit for the right amount made the wrong way still gets hit.

Underpayment Penalties and Form 2220

When a corporation fails to deposit enough estimated tax by any quarterly deadline, Section 6655 imposes an underpayment penalty. The charge functions as interest on the shortfall at the federal short-term rate plus three percentage points, compounded daily, with the rate reset each quarter.² For 2026, the rate was 7% in the first quarter and 6% in the second.¹

Each installment is evaluated independently. A shortfall on the April 15 payment starts accruing from that date until the deficit is covered or the return is due, whichever comes first. Catching up in a later installment stops future accrual but does not erase what already built up. Early-year underpayments are the most expensive because they compound longest.

Form 2220 is where the penalty is calculated and reported, along with any annualized income or seasonal installment computations. Even when no penalty is owed, a large corporation that based installment one on the prior year’s tax must still complete and attach Form 2220 to its return.⁶ Skipping that attachment can generate an erroneous penalty notice.

What Does Not Excuse an Underpayment

The statute provides very little relief. No penalty applies if the total tax shown on the return is less than $500.² Beyond that, Congress has occasionally enacted temporary waivers for specific situations, but there is no standing exception for business downturns, cash flow problems, or income volatility. For most large corporations, the annualized income installment method is the only practical way to keep payments aligned with earnings and avoid penalties when income swings.

If You Are Subject to the Corporate AMT

The corporate alternative minimum tax (CAMT) applies to corporations with average annual adjusted financial statement income above $1 billion. CAMT liability is part of total tax and must be included in estimated payments.

The IRS initially waived estimated tax penalties attributable to CAMT for the 2023 tax year and extended similar relief for 2024 and 2025.¹¹ Even during those waivers, affected corporations had to file Form 2220 and could exclude the CAMT portion when computing the required annual payment. As of early 2026, no formal extension of this relief had been announced for the 2026 tax year. Corporations subject to CAMT should watch for updated IRS guidance and plan installments assuming the penalty applies unless further relief is issued.

Recovering Overpayments With Form 4466

Large corporations that overshoot do not have to wait until filing to get the excess back. Form 4466 allows a quick refund, but only when the overpayment is at least 10% of expected tax liability and at least $500.¹²

The window is tight. Form 4466 must be filed after the tax year ends but before the income tax return is filed, and no later than the unextended due date of that return. An extension to file does not extend the Form 4466 deadline.¹² For a calendar-year corporation, that means the form must reach the IRS by April 15 of the following year. Filing the income tax return first closes the quick-refund option, leaving the overpayment to be claimed as a credit or refund on the return.

1
Internal Revenue Service. Quarterly Interest Rates
2
Office of the Law Revision Counsel. 26 USC 6655 – Failure by Corporation to Pay Estimated Income Tax
3
govinfo.gov. 26 CFR 1.6655-4 Large Corporations
4
Internal Revenue Service. Estimated Taxes
5
eCFR. 26 CFR 1.6655-2 – Annualized Income Installment Method
6
Internal Revenue Service. Instructions for Form 2220 (2025) – Underpayment of Estimated Tax by Corporations
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eCFR. 26 CFR 1.6655-3 – Adjusted Seasonal Installment Method
8
Internal Revenue Service. Publication 509 (2026), Tax Calendars
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eCFR. 26 CFR 31.6302-1 – Deposit Rules for Taxes Under the Federal Insurance Contributions Act (FICA) and Withheld Income Taxes
10
Internal Revenue Service. Information About Your Notice, Penalty and Interest
11
Internal Revenue Service. Relief From Additions to Tax for Underpayments Applicable to the New Corporate Alternative Minimum Tax
12
Internal Revenue Service. Instructions for Form 4466