Publication 505 - Tax Withholding And Estimated Tax Page 36
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49•
Your total 2002 tax (defined later) minus
justed gross income (AGI) for 2001 was more
your withholding is less than $1,000.
than $150,000 ($75,000 if your filing status is
4.
married filing a separate return in 2002), substi-
•
You did not have a tax liability for 2001.
tute 112% for 100% in (2) above.
•
You did not have any withholding taxes
For 2001, AGI is the amount shown on Form
and your current year tax less any house-
1040 – line 34; Form 1040A – line 20; and Form
Underpayment
hold employment taxes is less than
1040EZ – line 4.
$1,000.
Penalty figured for each period. Because
Penalty
Special rules apply if you are a farmer or fisher-
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
for 2002
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
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
Important Change
figure the penalty for you and send you a bill.
return.
However, you must complete Form 2210 or
Form 2210 – F and attach it to your return if you
Penalty rate. The penalty for underpayment
Example 4.1. You did not make estimated
are able to lower or eliminate your penalty. See
of 2002 estimated tax is figured at an annual rate
tax payments for 2002 because you thought you
Form 2210, later.
of 6% for the number of days the underpayment
had enough tax withheld from your wages. Early
remained unpaid from April 16, 2002, through
in January 2003, you made an estimate of your
Topics
December 31, 2002 and 5% from January 1,
total 2002 tax. Then you realized that your with-
2003, through April 15, 2003.
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.
penalty,
On January 10, you made an estimated tax
Important Reminders
•
payment of $3,000, the difference between your
Special rules for certain individuals,
withholding and your estimate of your total tax.
•
Exceptions to the underpayment penalty,
Your final return shows your total tax to be $50
Household employment taxes. When figur-
•
less than your estimate, so you are due a refund.
ing the penalty for failure to pay estimated in-
How to figure your underpayment and the
You do not owe a penalty for your payment
come tax, you generally must include with your
amount of your penalty on Form 2210, and
due January 15, 2003. However, you may owe a
estimated taxes any household employment
•
How to ask IRS to waive the penalty.
penalty through January 10, 2003, for your un-
taxes that you may have to pay.
derpayments for the earlier payment periods.
Failure to pay estimated tax. You will not be
Useful Items
Minimum required each period. You will
liable for the penalty for failure to pay estimated
You may want to see:
owe a penalty for any 2002 payment period for
income tax if the total tax shown on your return
which your estimated tax payment plus your
minus the amount you paid through withholding
Form (and Instructions)
withholding for the period and overpayments for
(including excess social security and railroad
previous periods was less than the smaller of:
retirement tax withholding) is less than $1,000.
2210 Underpayment of Estimated Tax by
Individuals, Estates, and Trusts
1) 22.5% of your 2002 tax, or
Exception to use of prior year’s tax. Certain
2210 – F Underpayment of Estimated Tax
taxpayers (other than farmers and fishermen)
2) 25% of your 2001 tax. (Your 2001 tax re-
by Farmers and Fishermen
must use 112% of their 2001 tax to figure any
turn must cover a 12-month period.)
2002 underpayment penalty. See Higher in-
See chapter 5 for information about getting
come taxpayers under General Rule, later.
Note. If you are subject to the rule for higher
these forms.
income taxpayers, discussed earlier, substitute
28% for 25% in (2) above.
Introduction
When penalty is charged. If you miss a
General Rule
payment or you paid less than the minimum
If you did not pay enough tax either through
required in a period, you may be charged an
withholding or by making estimated tax pay-
In general, you may owe a penalty for 2002 if the
underpayment penalty from the date the amount
ments, you will have an underpayment of esti-
total of your withholding and estimated tax pay-
was due to the date the payment is made.
mated tax and you may have to pay a penalty.
ments did not equal at least the smaller of:
Having completed copies of your latest fed-
Trust payments of estimated tax. If you
eral income tax returns may help you through
1) 90% of your 2002 tax, or
were a beneficiary of an estate or trust that
this chapter.
credited its estimated tax payments to you, treat
2) 100% of your 2001 tax. (Your 2001 tax
the amount credited (line 14a of Schedule K – 1
return must cover a 12-month period.)
No penalty. Generally, you will not have to
(Form 1041), Beneficiary’s Share of Income,
pay a penalty for 2002 if any of the following
Your 2002 tax, for this purpose, is your Total tax
Deductions, Credits, Etc.) as an estimated tax
situations applies.
for 2002, defined under Exceptions, later.
payment made by you on January 15, 2003.
•
The total of your withholding and esti-
Special rules for certain individuals. There
Amended returns. If you file an amended re-
mated tax payments was at least as much
are special rules for farmers and fishermen, and
turn by the due date of your original return, use
as your 2001 tax (or 112% of your 2001
for certain higher income taxpayers.
the tax shown on your amended return to figure
tax if your adjusted gross income was
your required estimated tax payments. If you file
more than $150,000 — $75,000 if your
Farmers and fishermen. If at least
an amended return after the due date of the
2002 filing status is married filing sepa-
two-thirds of your gross income for 2001 or 2002
original return, use the tax shown on the original
rately), and you paid all required estimated
is from farming or fishing, substitute 66
/
% for
2
3
return.
tax payments on time.
90% in (1) above.
However, if you and your spouse file a joint
See Farmers and Fishermen, later.
•
The tax balance due on your return is no
return after the due date to replace separate
more than 10% of your total 2002 tax, and
Higher income taxpayers. If less than
returns you originally filed by the due date, use
you paid all required estimated tax pay-
two-thirds of your gross income for 2001 and
the tax shown on the joint return to figure your
ments on time.
2002 is from farming or fishing and your ad-
required estimated tax payments. This rule ap-
Page 36
Chapter 4 Underpayment Penalty for 2002
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