Publication 505 - Tax Withholding And Estimated Tax (Page 17 of 49) in pdf

charged a penalty. If you do not pay enough by

head of household, uses the following informa-

the due date of each payment period (see When

tion.

To Pay Estimated Tax, later), you may be

Expected AGI for 2002 . . . . . . . . . . . .

$61,125

charged a penalty even if you are due a refund

AGI for 2001 . . . . . . . . . . . . . . . . . .

$58,950

when you file your tax return. For information on

Tax shown on 2001 return . . . . . . . . . .

$10,500

when the penalty applies, see chapter 4.

Tax expected to be shown on 2002 return

$11,500

Estimated Tax

Tax expected to be withheld in 2002 . . . .

$10,400

It would be helpful for you to keep a

TIP

copy of your 2001 tax return and an

Jane uses Figure B (on the next page).

estimate of your 2002 income nearby

Jane’s answer to the chart’s first question is YES

for 2002

while reading this chapter.

— she expects to owe at least $1,000 for 2002

after subtracting her withholding from her ex-

pected tax ($11,500 − $10,400 = $1,100). Her

Topics

Important Changes

answer to the chart’s second question is also

This chapter discusses:

YES — she expects her income tax withholding

for 2002

($10,400) to be at least 90% of the tax to be

•

Who must make estimated tax payments,

shown on her 2002 return ($11,500 × 90% =

•

$10,350). Jane does not need to pay estimated

How to figure estimated tax (including il-

Estimated tax safe harbor for higher income

tax.

lustrated examples),

individuals. For installment payments for tax

•

years beginning in 2002, the estimated tax safe

When to pay estimated tax,

Example 2.2. The facts are the same as in

harbor for higher income individuals (other than

•

Example 2.1, except that Jane expects only

How to figure each payment, and

farmers and fishermen) has been modified. If

$8,500 tax to be withheld in 2002. Because that

•

your adjusted gross income is more than

How to pay estimated tax.

is less than $10,350, her answer to the chart’s

$150,000 ($75,000 if married filing a separate

second question is NO.

return), your withholding and estimated tax pay-

Jane’s answer to the chart’s third question is

Useful Items

ments must be at least the smaller of 90% of

also NO — she does not expect her income tax

You may want to see:

your tax liability for 2002 or 112% of the tax

withholding ($8,500) to be at least 100% of the

shown on your 2001 return (provided your 2001

tax shown on her 2001 return ($10,500). Jane

Publication

return covered all 12 months) to avoid an esti-

must make estimated tax payments for 2002.

mated tax penalty.

553

Highlights of 2001 Tax Changes

Example 2.3. The facts are the same as in

Example 2.2, except that the tax shown on

Form (and Instructions)

Jane’s 2001 return was $8,000. Because she

Important Reminders

1040 – ES Estimated Tax for Individuals

expects to have more than $8,000 withheld in

2002, her answer to the chart’s third question is

See chapter 5 for information about how to get

YES. Jane does not need to pay estimated tax

Who must pay estimated tax. You must pay

this publication and form.

for 2002.

estimated tax unless the total tax shown on your

return minus the amount you paid through with-

Married Taxpayers

holding (including excess social security and

railroad retirement tax withholding) will be less

Who Must Make

To figure whether you must make estimated tax

than $1,000.

payments, apply the rules discussed here to

Estimated Tax

Payment of estimated tax by electronic

your separate estimated income. If you can

funds withdrawal. You may be able to pay

make joint estimated tax payments, you can

Payments?

your estimated tax by authorizing an automatic

apply these rules on a joint basis.

withdrawal from your checking or savings ac-

You and your spouse can make joint esti-

count. For more information, see Payment by

If you had a tax liability for 2001, you may have

mated tax payments even if you are not living

Electronic Funds Withdrawal under How To Pay

to pay estimated tax for 2002.

together.

Estimated Tax, later.

You and your spouse cannot make joint esti-

General Rule

mated tax payments if:

Employment taxes on household employ-

ees. If you either receive income from which

1) You are legally separated under a decree

You must make estimated tax payments for

tax is withheld or must make estimated tax pay-

of divorce or separate maintenance,

2002 if both of the following apply.

ments, you must include any expected employ-

2) Either spouse is a nonresident alien, or

ment (social security, Medicare, and federal

1) You expect to owe at least $1,000 in tax

unemployment) taxes for household employees

3) You and your spouse have different tax

for 2002, after subtracting your withholding

when figuring your estimated tax.

years.

and credits, and

Whether you and your spouse make joint

2) You expect your withholding and credits to

estimated tax payments or separate payments

be less than the smaller of:

will not affect your choice of filing a joint tax

Introduction

a) 90% of the tax to be shown on your

return or separate returns for 2002.

2002 tax return, or

Estimated tax is the method used to pay tax on

2001 separate returns and 2002 joint return.

income that is not subject to withholding. This

b) 100% of the tax shown on your 2001

If you plan to file a joint return with your spouse

includes income from self-employment, interest,

tax return. Your 2001 tax return must

for 2002, but you filed separate returns for 2001,

dividends, alimony, rent, gains from the sale of

cover all 12 months.

your 2001 tax is the total of the tax shown on

assets, prizes, and awards. You also may have

your separate returns. You filed a separate re-

to pay estimated tax if the amount of income tax

If all your income will be subject to

turn if you filed as single, head of household, or

being withheld from your salary, pension, or

TIP

income tax withholding, you probably

married filing separately.

other income is not enough.

do not need to make estimated tax

Estimated tax is used to pay both income tax

2001 joint return and 2002 separate re-

payments.

and self-employment tax, as well as other taxes

turns. If you plan to file a separate return for

and amounts reported on your tax return. If you

2002, but you filed a joint return for 2001, your

do not pay enough through withholding or by

Example 2.1. To figure whether she should

2001 tax is your share of the tax on the joint

making estimated tax payments, you may be

pay estimated tax for 2002, Jane, who files as

return. You file a separate return if you file as

Chapter 2 Estimated Tax for 2002

Page 17

Publication 505 - Tax Withholding And Estimated Tax Page 17

Related Articles

Related forms

Related Categories