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9.3 Estimated Tax: Individuals
What can I do to make sure I will not owe the IRS on my 2004 income tax
return?
You can either increase the amount of income tax withheld from your pay or make
estimated tax payments for 2004. You may change the amount of income tax withheld
from your pay by filing a new Form W-4 (PDF), Employee's
Withholding Allowance Certificate. Form 1040-ES (PDF), Estimated
Tax for Individuals, has a worksheet to see if you need to make estimated tax
payments. For more details, refer to Tax Topic 355, Estimated Tax, or Publication 505, Tax Withholding and Estimated Tax.
References:
How do I know if I have to file quarterly individual estimated tax payments?
Estimated tax payments can be used to pay Federal income tax, self-employment tax,
and household employment tax. To estimate if you need to pay tax on income not subject
to withholding or on other income from which not enough tax is withheld, you need
to calculate if the total tax you'll owe on your annual income tax return will be
covered by the amount of tax you have already had either:
withheld from wages and other payments, or
paid in earlier estimated payments for the year, or
credited to your account from adjustments or overpayments to previously filed
returns.
Generally, you should make estimated tax payments if you will owe tax of $1,000
or more, after withholding and credits, and the total amount of tax withheld and your
credits will be less than the smaller of:
90% of the tax to be shown on your current tax return, or
100% of the tax shown on your prior year's tax return, if your prior year's tax
return covered all 12 months of the year. However, if your prior year's adjusted gross
income exceeded $150,000, or $75,000 if you filed a separate return from your spouse,
then you must pay 110% instead of 100% of last year's tax. (Note: the percentages
change depending on the tax year. Refer to Publication 505, Tax Withholding
and Estimated Tax.)
Estimated tax requirements are different for farmers and fishermen. Publication 505, Tax
Withholding and Estimated Tax, provides more information about these special
estimated tax rules and about estimated tax in general. Get Form 1040-ES (PDF), Estimated Tax for Individuals, to help you figure your estimated
tax liability for 2004.
References:
How do I calculate the amount of estimated tax I will owe?
You should get Form 1040-ES (PDF), Estimated Tax for
Individuals and complete the worksheet on page 4, to help you figure your estimated
tax liability.
References:
Are all the quarterly estimated tax payments the same amount?
Normally, you determine your tax at the first of the year and divide by 4 but this
can change as your income may change for a certain quarter. If your income fluctuates
during the year, you should complete the 2004 Annualized Estimated Tax Worksheet in Publication 505, Tax Withholding and Estimated Tax. The worksheet annualizes your
tax at the end of each period based on a reasonable estimate of your income, deductions,
and other items relating to events that occurred since the beginning of the tax year
through the end of the period. Use the result you figure on line 25d of 2004 Annualized
Estimated Tax Worksheet in Publication 505 to make your estimated tax payments and
complete your payment-vouchers.
References:
Do self-employment taxes need to be paid quarterly or yearly?
Self-employment tax is paid by making quarterly estimated tax payments which include
both income tax and social security tax.
References:
What form will I use to make estimated payments?
Use Form 1040-ES (PDF), Estimated Tax for Individuals,
to estimate your tax liability. Four payment vouchers are included in the 1040ES package
that are used to send your payment to the Internal Revenue Service
References:
Can I combine my estimated tax payment with the payment for my Form 1040?
Estimated tax payments should not be sent with or be included in checks or money
orders for payment of Federal income tax with your return. Mail your estimated tax
payments separately to the address shown in the
Instructions for Form 1040-ES.
For additional information on ensuring proper credit of payments, refer to Tax Topic 158, Ensuring Proper Credit of Payments.
References:
When are the quarterly estimated tax returns due?
Your first estimated tax payment is usually due the 15th of April. You may pay
the entire year's estimated tax at that time, or you may pay your estimated tax in
four payments. The four payments are due April 15th, June 15th, September 15, and
January 15th of the following year.
If the due date for making an estimated tax payment falls on a Saturday, Sunday,
or legal holiday, the payment will be on time if you make it on the next day that
is not a Saturday, Sunday, or legal holiday. For example, a payment due Saturday,
January 15, 2005 will be on time if you make it by Tuesday January 18, 2005. Note:
Monday January 17, 2005 is a legal holiday.
References:
Where do I send my individual estimated tax payments?
Where you send your individual estimated tax payments depends on where you live.
Refer to Form 1040-ES (PDF) , page 6 for the correct mailing
address.
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How do I report the estimated payments I have made when I file my taxes
at the end of the year?
Take credit for all your estimated tax payments for 2003 on line 62 of Form 1040 (PDF) , U.S. Individual Income Tax Return , or
line 40 of Form 1040A (PDF) , U.S. Individual Income
Tax Return .
References:
Can I make my quarterly individual estimated tax payments by credit card?
You can generally pay part or all of your estimated tax by using a credit card
(American Express Card®, DiscoverCard®, MasterCard®, or Visa® card).
Payments can be made by phone or Internet. There are two credit card processors
(also referred to as service providers), which offer this service. Service providers
charge you a convenience fee for the service.
References:
I'm concerned because my check payment to the IRS has not been cashed yet.
What should I do?
You may call 1-800-829-1040 and ask an IRS representative if the payment has been
credited to your account. If it has not, you may choose to place a stop-payment on
the original check and reissue the payment.
I was self-employed for the first half of the year and made estimated tax
payments. Now, I am a wage earner and my employer withholds taxes. Must I continue
to make estimated tax payments?
In general, you may owe a penalty for 2003 if the total of your withholding and
estimated tax payments did not equal at least the smaller of:
90% of your 2003 tax, or
100%* of your 2002 tax. (Your 2002 tax return must cover a 12-month period.)
If your timely and correct estimated tax payments plus the Federal withholding
from your wages meet the estimated tax requirements shown above, you will not need
to make any additional payments for estimated tax, nor will you need to inform the
IRS of the change.
*If the total amount of your withholding and estimated tax payments equalled 100%
of your 2002 income tax liability, you will not be subject to the failure to pay estimated
tax penalty. However, not making additional estimated tax payments may mean that you
have a large income tax liability when you file your income tax return. (If you are
a higher income taxpayer with a AGI of more than $150,000 ($75,000 if your filing
status is married filing separate)), substitute 110% for 100% if last year is 2002.
Note: the percentage change depending on the tax refer to Publication 505 , Tax
Withholding and Estimated Tax.
References:
I filed a quarterly 1040-ES in April and paid the difference between my
total tax bill last year and this year's withholdings. Therefore, I believe I have
paid the minimum amount of estimated tax payments. Do I have to submit a Form 1040-ES
for the, second, third, and fourth quarters?
Since you have paid 100%* of your prior year income tax liability, you will not
be subject to the failure to pay estimated tax penalty. However, not making additional
estimated tax payments may mean that you have a large income tax liability when you
do file your income tax return.
*Substitute 110% for 100% if:
1. Your AGI exceed $150,000 on the prior year return and your filing status for
the prior year is anything other than MFS or
2. You filed MFS for the prior year and AGI exceeded $75,000.
References:
Is there a way to have Federal income tax withheld from unemployment compensation,
in lieu of making estimated tax payments?
You may have Federal income tax withheld from unemployment compensation by filing Form W-4V (PDF), Voluntary Withholding Request with the payor.
For additional information on unemployment compensation, refer to Tax Topic 418, Unemployment
Compensation.
References:
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