O. Figuring and Paying Estimated Tax

A domestic exempt private foundation, a domestic taxable private foundation, or a nonexempt charitable trust treated as a private foundation must make estimated tax payments for the excise tax based on investment income if it can expect its estimated tax (section 4940 tax minus allowable credits) to be $500 or more. The number of installment payments it must make under the depository method is determined at the time during the year that it first meets this requirement. For calendar-year taxpayers, the first deposit of estimated taxes for a year should generally be made by May 15 of the year.

Although Form 990-W is used primarily to figure the installment payments of unrelated business income tax, it is also used to determine the timing and amounts of installment payments of the section 4940 tax based on investment income. Figure separately any required deposits of excise tax based on investment income and unrelated business income tax.

To figure the estimated tax for the excise tax based on investment income, see Part V. Enter the tax you figured on line 10a of Form 990-W.

The Form 990-W line items and instructions for large organizations also apply to private foundations. For purposes of paying the estimated tax on net investment income, a “large organization” is one that had net investment income of $1 million or more for any of the 3 tax years immediately preceding the tax year involved.

Addition to Tax. A foundation that doesn't pay the proper estimated tax when due may be subject to the estimated addition to tax for the period of the underpayment. See sections 6655(b) and (d) and the Form 2220 instructions for further information.

With regard to figuring and paying employment taxes, see Pub. 15 (Circular E).

Special Rules

Section 4947(a)(1) nonexempt charitable trusts. Form 1041-ES should be used to pay any estimated tax on income subject to tax under section 1. Form 1041-ES also contains the estimated tax rules for paying the tax on that income.