Publication 505 - Tax Withholding And Estimated Tax (Page 21 of 49) in pdf

The earned income credit is shown on line 41

Finally, he determines that his required annual

income tax return and pays the balance due as

of the 2002 Form 1040A. The additional child tax

payment is $49,500, the smaller of the two.

shown on her return on January 23, 2004.

credit is shown on line 42 of the 2002 Form

Janet’s estimated tax for the fourth payment

1040A.

Total Estimated

period is considered to have been paid on time.

However, she may owe a penalty for not making

The result of steps 1 through 6 is your total

Tax Payments

the first three estimated tax payments. Any pen-

expected tax for 2003 (line 13c of the 2003

alty for not making those payments will be fig-

Estimated Tax Worksheet).

Figure the total amount you must pay for 2003

ured up to January 23, 2004.

through estimated tax payments on lines 15 and

Required Annual Payment

16 of the 2003 Estimated Tax Worksheet. Sub-

Fiscal year taxpayers. If your tax year does

tract your expected withholding from your re-

not start on January 1, your payment due dates

You figure the total amount you must pay for

quired annual payment. You usually must pay

are:

2003 through withholding and estimated tax

this difference in four equal installments. (See

payments on lines 14a through 14c of the 2003

When To Pay Estimated Tax and How To Figure

1) The 15th day of the 4th month of your

Estimated Tax Worksheet.

Each Payment, later.)

fiscal year,

If your total expected tax on line 13c, minus

2) The 15th day of the 6th month of your

General rule. The total amount you must pay

your expected withholding on line 15, is less

fiscal year,

is the smaller of:

than $1,000, you do not need to make estimated

tax payments.

3) The 15th day of the 9th month of your

1) 90% of your total expected tax for 2003, or

fiscal year, and

Withholding. Your expected withholding for

2) 100% of the total tax shown on your 2002

4) The 15th day of the 1st month after the

2003 includes the income tax you expect to be

return. Your 2002 tax return must cover all

end of your fiscal year.

withheld from all sources (wages, pensions and

12 months.

annuities, etc.). It also includes excess social

You do not have to make the last payment

security and railroad retirement tax you expect

listed above if you file your income tax return by

Exceptions. There are exceptions to the gen-

to be withheld from your wages.

the last day of the first month after the end of

eral rule for certain higher income taxpayers and

For this purpose, you will have excess social

your fiscal year and pay all the tax you owe with

for farmers and fishermen.

security or tier 1 railroad retirement tax withhold-

your return.

ing for 2003 only if your wages from two or more

Higher income taxpayers. If your adjusted

employers are more than $87,000.

gross income (AGI) for 2002 was more than

When To Start

$150,000 ($75,000 if your filing status for 2003 is

married filing a separate return), substitute

You do not have to make estimated tax pay-

110% for 100% in (2) above. This rule does not

ments until you have income on which you will

When To Pay

apply to farmers and fishermen.

owe the tax. If you have income subject to esti-

For 2002, AGI is the amount shown on Form

mated tax during the first payment period, you

Estimated Tax

1040 – line 36; Form 1040A – line 22; and Form

must make your first payment by the due date

1040EZ – line 4.

for the first payment period. You can pay all your

For estimated tax purposes, the year is divided

estimated tax at that time, or you can pay it in

Farmers and fishermen. If at least

into four payment periods. Each period has a

installments. If you choose to pay in install-

two-thirds of your gross income for 2002 or 2003

specific payment due date. If you do not pay

ments, make your first payment by the due date

is from farming or fishing, your required annual

enough tax by the due date of each of the pay-

for the first payment period. Make your remain-

payment is the smaller of:

ment periods, you may be charged a penalty

ing installment payments by the due dates for

even if you are due a refund when you file your

the later periods.

1) 66

% (.6667) of your total tax for 2003, or

income tax return. The following chart gives the

No income subject to estimated tax during

2) 100% of the total tax shown on your 2002

payment periods and due dates for estimated

first period. If you do not have income subject

return. (Your 2002 tax return must cover

tax payments.

to estimated tax until a later payment period, you

all 12 months.)

can make your first payment by the due date for

Table 2.3

For definitions of “gross income from farm-

that period. You can pay your entire estimated

ing” and “gross income from fishing,” see Farm-

For the period:

Due date:

tax by the due date for that period or you can pay

ers and Fishermen later under When To Pay

it in installments by the due date for that period

Jan. 1* through March 31 . . . April 15

Estimated Tax.

and the due dates for the remaining periods. The

April 1 through May 31 . . . . . June 15

June 1 through August 31 . . . September 15

following chart shows the dates for making in-

Total tax for 2002. Your 2002 total tax on

Sept. 1 through Dec. 31 . . . . Jan. 15 next

stallment payments.

Form 1040 is the amount on line 61 reduced by

year**

the total of the amounts on lines 57, 64, and 66,

Table 2.4

*If your tax year does not begin on January 1, see

any credit from Form 4136 included on line 68,

Fiscal year taxpayers, later.

any recapture of a federal mortgage subsidy and

If you first have

**See January payment, later.

income on

any uncollected social security, Medicare, or

which you

railroad retirement tax included on line 61, and

must pay

Make a

Make later in-

Saturday, Sunday, holiday rule. If the due

any tax on excess contributions to IRAs and

estimated tax:

payment by:

stallments by:

date for making an estimated tax payment falls

medical savings accounts, and on excess accu-

on a Saturday, Sunday, or legal holiday, the

Before April 1

April 15

June 15

mulations in qualified retirement plans from

September 15

payment will be on time if you make it on the next

Form 5329 included on line 58.

January 15

day that is not a Saturday, Sunday, or legal

On Form 1040A, it is line 38 reduced by the

next year*

holiday. For example, a payment due Sunday,

amounts on lines 41 and 42. On Form 1040EZ, it

June 15, 2003, will be on time if you make it by

is line 10 reduced by line 8.

After March 31 June 15

September 15

Monday, June 16, 2003.

and before

January 15

Example 2.5. Jeremy Martin’s total tax on

June 1

next year*

his 2002 return was $45,000, and his expected

January payment. If you file your 2003 Form

tax for 2003 is $70,000. His 2002 AGI was

After May 31

September 15

January 15

1040 or Form 1040A by February 2, 2004, and

and before

next year*

$180,000. Because Jeremy had more than

pay the rest of the tax you owe, you do not need

Sept. 1

$150,000 of AGI in 2002, he figures his required

to make your estimated tax payment that would

annual payment as follows. He determines that

be due on January 15, 2004.

90% of his expected tax for 2003 is $63,000 (.90

× $70,000). Next, he determines that 110% of

Example 2.6. Janet Adams does not pay

the tax shown on his 2002 return is $49,500.

any estimated tax for 2003. She files her 2003

Chapter 2 Estimated Tax for 2003

Page 21

Publication 505 - Tax Withholding And Estimated Tax Page 21

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