Publication 505 - Tax Withholding And Estimated Tax Page 37

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you paid all required estimated tax pay-
Higher income taxpayers. If less than
ments on time.
two-thirds of your gross income for 2000 and
2001 is from farming or fishing and your ad-
4.
Your total 2001 tax (defined later) minus
justed gross income (AGI) for 2000 was more
your withholding is less than $1,000.
than $150,000 ($75,000 if your filing status is
You did not have a tax liability for 2000.
married filing a separate return in 2001), substi-
tute 110% for 100% in (2) above.
Underpayment
You did not have any withholding taxes
For 2000, AGI is the amount shown on Form
and your current year tax less any house-
1040 – line 34; Form 1040A – line 19; and Form
hold employment taxes is less than
Penalty
1040EZ – line 4.
$1,000.
Penalty figured for each period. Because
Special rules apply if you are a farmer or fisher-
for 2001
the penalty is figured separately for each pay-
man.
ment period, you may owe a penalty for a pay-
ment period even if you later paid enough to
IRS can figure the penalty for you. If you
make up the underpayment. If you did not pay
think you owe the penalty but you do not want to
Important Change
enough tax by the due date of any of the pay-
figure it yourself when you file your tax return,
ment periods, you may owe a penalty even if you
you may not have to. Generally, the IRS will
are due a refund when you file your income tax
figure the penalty for you and send you a bill.
Penalty rate. The penalty for underpayment
return.
However, you must complete Form 2210 or
of 2001 estimated tax is figured at an annual rate
Form 2210 – F and attach it to your return if you
of 8% for the number of days the underpayment
Example 4.1. You did not make estimated
are able to lower or eliminate your penalty. See
remained unpaid from April 16, 2001, through
tax payments for 2001 because you thought you
Form 2210, later.
June 30, 2001; 7% from July 1, 2001, through
had enough tax withheld from your wages. Early
December 31, 2001; and 6% from January 1,
in January 2002, you made an estimate of your
Topics
2002, through April 15, 2002.
total 2001 tax. Then you realized that your with-
This chapter discusses:
holding was $2,000 less than the amount
needed to avoid a penalty for underpayment of
The general rule for the underpayment
estimated tax.
Important Reminders
penalty,
On January 11, you made an estimated tax
payment of $3,000, the difference between your
Special rules for certain individuals,
withholding and your estimate of your total tax.
Household employment taxes. When figur-
Exceptions to the underpayment penalty,
Your final return shows your total tax to be $50
ing the penalty for failure to pay estimated in-
less than your estimate, so you are due a refund.
come tax, you generally must include with your
How to figure your underpayment and the
You do not owe a penalty for your payment
estimated taxes any household employment
amount of your penalty on Form 2210, and
due January 15, 2002. However, you may owe a
taxes that you may have to pay.
How to ask IRS to waive the penalty.
penalty through January 11, 2002 for your un-
Failure to pay estimated tax. You will not be
derpayments for the earlier payment periods.
liable for the penalty for failure to pay estimated
Useful Items
Minimum required each period. You will
income tax if the total tax shown on your return
You may want to see:
owe a penalty for any 2001 payment period for
minus the amount you paid through withholding
which your estimated tax payment plus your
(including excess social security and railroad
withholding for the period and overpayments for
Form (and Instructions)
retirement tax withholding) is less than $1,000.
previous periods was less than the smaller of:
2210 Underpayment of Estimated Tax by
Exception to use of prior year’s tax. Certain
Individuals, Estates, and Trusts
1) 22.5% of your 2001 tax, or
taxpayers (other than farmers and fishermen)
must use 110% of their 2000 tax to figure any
2210 – F Underpayment of Estimated Tax
2) 25% of your 2000 tax. (Your 2000 tax re-
2001 underpayment penalty. See Higher in-
by Farmers and Fishermen
turn must cover a 12-month period.)
come taxpayers under General Rule, later.
See chapter 5 for information about getting
Note. If you are subject to the rule for higher
these forms.
income taxpayers, discussed earlier, substitute
27.5% for 25% in (2) above.
Introduction
When penalty is charged. If you miss a
If you did not pay enough tax either through
General Rule
payment or you paid less than the minimum
withholding or by making estimated tax pay-
required in a period, you may be charged an
ments, you will have an underpayment of esti-
underpayment penalty from the date the amount
In general, you may owe a penalty for 2001 if the
mated tax and you may have to pay a penalty.
was due to the date the payment is made.
total of your withholding and estimated tax pay-
Having completed copies of your latest fed-
ments did not equal at least the smaller of:
Trust payments of estimated tax credited to
eral income tax returns may help you through
you. If you were a beneficiary of an estate or
this chapter.
1) 90% of your 2001 tax, or
trust that credited its estimated tax payments to
you, treat the amount credited (line 14a of
No penalty. Generally, you will not have to
2) 100% of your 2000 tax. (Your 2000 tax
Schedule K – 1 (Form 1041), Beneficiary’s
pay a penalty for 2001 if any of the following
return must cover a 12-month period.)
Share of Income, Deductions, Credits, Etc.) as
situations applies.
Your 2001 tax, for this purpose, is your Total tax
an estimated tax payment made by you on Janu-
for 2001, defined under Exceptions, later.
The total of your withholding and esti-
ary 15, 2002.
mated tax payments was at least as much
Amended returns. If you file an amended re-
Special rules for certain individuals. There
as your 2000 tax (or 110% of your 2000
turn by the due date of your original return, use
are special rules for farmers and fishermen, and
tax if your adjusted gross income was
the tax shown on your amended return to figure
for certain higher income taxpayers.
more than $150,000 — $75,000 if your
your required estimated tax payments. If you file
2001 filing status is married filing sepa-
Farmers and fishermen. If at least
an amended return after the due date of the
rately), and you paid all required estimated
two-thirds of your gross income for 2000 or 2001
original return, use the tax shown on the original
tax payments on time.
is from farming or fishing, substitute 66
/
% for
2
return.
3
90% in (1) above.
The tax balance due on your return is no
However, if you and your spouse file a joint
more than 10% of your total 2001 tax, and
See Farmers and Fishermen later.
return after the due date to replace separate
Chapter 4 Underpayment Penalty for 2001
Page 37

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