How To Figure
Each Payment
You should pay enough estimated tax by the due date of each payment period to avoid a
penalty for that period. You can figure your required payment for each period by using
either the regular installment method or the annualized income installment method. These
methods are described in Publication 505. If you do not pay enough each payment period,
you may be charged a penalty even if you are due a refund when you file your tax return.
Underpayment penalty. If your estimated tax payment for a
previous period is less than one-fourth of your amended estimated tax, you may be charged
a penalty for underpayment of estimated tax for that period when you file your tax return.
See chapter 4 of Publication 505 for more information.
Estimated Tax Payments
Not Required
You do not have to make estimated tax payments if your withholding in each payment
period is at least one-fourth of your required annual payment or at least your required
annualized income installment for that period. You also do not have to make estimated tax
payments if you will pay enough through withholding to keep the amount you owe with your
return under $1,000.
How To Pay Estimated Tax
There are five ways to pay estimated tax.
- By crediting an overpayment on your 2002 return to your 2003 estimated tax.
- By sending in your payment with a payment-voucher from Form
1040-ES.
- By paying electronically using the Electronic Federal Tax Payment System (EFTPS).
For EFTPS information, call 1-800-945-8400 or 1-800-555-4477.
- By electronic funds withdrawal if you are filing Form 1040 or Form 1040A
electronically.
- By credit card using a pay-by-phone system or the Internet.
Crediting an Overpayment
When you file your Form 1040 or Form 1040A for 2002 and you have an
overpayment of tax, you can apply part or all of it to your estimated tax for 2003.
On line 72 of Form 1040, or line 46 of Form 1040A, write the amount you want credited to
your estimated tax rather than refunded. The amount you have credited should be taken into
account when figuring your estimated tax payments.
You can use all the credited amount toward your first payment, or you can spread it out
in any way you choose among any or all of your payments.
If you ask that an overpayment be credited to your estimated tax for the next year, the
payment is considered to have been made on the due date of the first estimated tax
installment (April 15 for calendar year taxpayers). You cannot have any of that amount
refunded to you after that due date until the close of that tax year. You also cannot use
that overpayment in any other way after that date.
Using the Payment-Vouchers
Each payment of estimated tax must be accompanied by a
payment-voucher from Form 1040-ES. If you made estimated tax payments last year,
you should receive a copy of the 2003 Form 1040-ES in the mail. It will have
payment-vouchers preprinted with your name, address, and social security number. Using the
preprinted vouchers will speed processing, reduce the chance of error, and help save
processing costs.
If you did not pay estimated tax last year, you will have to get a copy of Form 1040-ES
from the IRS. After you make your first payment, a Form 1040-ES package with the
preprinted vouchers will be mailed to you. Follow the instructions in the package to make
sure you use the vouchers correctly.
Use the window envelopes that came with your Form 1040-ES package. If you use your own
envelope, make sure you mail your payment-vouchers to the address shown in the Form
1040-ES instructions for the place where you live.
Do not use the address shown in the Form 1040 or Form 1040A
instructions.
If you file a joint return and you are making joint estimated tax payments, please
enter the names and social security numbers on the payment voucher in the same order as
they will appear on the joint return.
Change of address. You must
notify the IRS if you are making estimated tax payments and you changed your address
during the year. You must send a clear and concise written statement to the IRS
Service Center where you filed your last return and provide all of the following:
- Your full name (and your spouse's full name),
- Your signature (and spouse's signature),
- Your old address (and spouse's old address if different),
- Your new address, and
- Your social security number (and spouse's social security number).
You can use Form 8822, Change of Address, for
this purpose.
You can continue to use your old preprinted payment-vouchers until the IRS sends you
new ones. However, do not correct the address on the old voucher.
Payment by Electronic Funds Withdrawal or Credit Card
If you want to make estimated payments by electronic funds withdrawal
or by credit card, see the Form 1040-ES instructions or How To Pay Estimated
Tax in Publication 505.
Credit for Withholding
and Estimated Tax
When you file your 2002 income tax return, take credit for all the
income tax and excess social security or railroad retirement tax withheld from your
salary, wages, pensions, etc. Also, take credit for the estimated tax you paid for 2002.
These credits are subtracted from your tax. You should file a return and claim these
credits, even if you do not owe tax.
If you had two or more employers and were paid wages of more than $84,900 during 2002,
too much social security or railroad retirement tax may have been withheld from your
wages. See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld in
chapter 38.
Withholding
If you had income tax withheld during 2002, you should receive a
statement by January 31, 2003, showing your income and the tax withheld. Depending
on the source of your income, you will receive:
- Form W-2, Wage and Tax Statement,
- Form W-2G, Certain Gambling Winnings, or
- A form in the 1099 series.
Forms W-2 and W-2G. You file
Form W-2 with your income tax return. File Form W-2G with your return if it shows
any federal income tax withheld from your winnings.
You should get at least two copies of each form you receive. Attach one copy to the
front of your federal income tax return. Keep one copy for your records. You should also
receive copies to file with your state and local returns.
Form W-2
Your employer should give you a Form W-2 for 2002 by January 31, 2003. You should
receive a separate Form W-2 from each employer you worked for.
If you stop working before the end of the year, your employer can give you your Form
W-2 at any time after you leave your job. However, your employer must give it to you by
January 31 of the following year (or the next day that is not a Saturday, Sunday, or
holiday if January 31 is a Saturday, Sunday, or holiday).
If you ask for the form, your employer must give it to you within 30 days after
receiving your written request or within 30 days after your final wage payment, whichever
is later.
If you have not received your Form W-2 on time, you should ask your employer for it. If
you do not receive it by February 15, call the IRS.
Form W-2 shows your total pay and other compensation and the income tax, social
security tax, and Medicare tax that was withheld during the year. Include the federal
income tax withheld (as shown on Form W-2) on:
- Line 62 if you file Form 1040,
- Line 39 if you file Form 1040A, or
- Line 7 if you file Form 1040EZ.
Form W-2 is also used to report any taxable sick pay you received and any income tax
withheld from your sick pay.
Form W-2G
If you had gambling winnings in 2002, the payer may have withheld 27% as income tax. If
tax was withheld, the payer will give you a Form W-2G showing the amount you won and the
amount of tax withheld.
Report the amounts you won on line 21 of Form 1040. Take credit for the tax withheld on
line 62 of Form 1040. If you had gambling winnings, you must use Form 1040; you cannot use
Form 1040A or Form 1040EZ.
The 1099 Series
Most forms in the 1099 series are not filed with your return. You should receive these
forms by February 1, 2003. Keep these forms for your records. There are several different
forms in this series, including:
- Form 1099-B, Proceeds From Broker and Barter Exchange Transactions,
- Form 1099-DIV, Dividends and Distributions,
- Form 1099-G, Certain Government Payments,
- Form 1099-INT, Interest Income,
- Form 1099-MISC, Miscellaneous Income,
- Form 1099-OID, Original Issue Discount,
- Form 1099-R, Distributions From Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,
- Form SSA-1099, Social Security Benefit Statement, and
- Form RRB-1099, Payments by the Railroad Retirement Board.
If you received the types of income reported on some forms in the 1099 series, you may
not be able to use Form 1040A or Form 1040EZ. See the instructions to these forms for
details.
Form 1099-R. Attach Form 1099-R to your return if box 4 shows
federal income tax withheld. Include the amount withheld in the total on line 62 of Form
1040 or line 39 of Form 1040A. You cannot use Form 1040EZ if you received payments
reported on Form 1099-R.
Backup withholding. If you were subject to backup withholding on
income you received during 2002, include the amount withheld, as shown on your Form 1099,
in the total on line 62 of Form 1040, or line 39 of Form 1040A.
Form Not Correct
If you receive a form with incorrect information on it, you should ask the payer for a
corrected form. Call the telephone number or write to the address given for the payer on
the form. The corrected Form W-2G or Form 1099 you receive will be marked Corrected.
A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a
Form W-2.
Form Received After Filing
If you file your return and you later receive a form for income that you did not
include on your return, you should report the income and take credit for any income tax
withheld by filing Form 1040X, Amended U.S. Individual Income Tax Return.
Separate Returns
If you are married but file a separate return, you can take credit only for the tax
withheld from your own income. Do not include any amount withheld from your spouse's
income. However, different rules may apply if you live in a community property state.
Community property states are listed in chapter 2. For more information on these rules,
and some exceptions, see Publication 555, Community Property.
Fiscal Years
If you file your tax return on the basis of a fiscal year (a 12-month
period ending on the last day of any month except December), you must follow
special rules to determine your credit for federal income tax withholding. For a
discussion of how to take credit for withholding on a fiscal year return, see Fiscal
Years in chapter 3 of Publication 505.
Estimated Tax
Take credit for all your estimated tax payments for 2002 on line 63
of Form 1040 or line 40 of Form 1040A. Include any overpayment from 2001 that you
had credited to your 2002 estimated tax. You must use Form 1040 or Form 1040A if you paid
estimated tax. You cannot use Form 1040EZ.
Name changed. If you changed
your name, and you made estimated tax payments using your old name, attach a brief
statement to the front of your tax return indicating:
- When you made the payments,
- The amount of each payment,
- The IRS address to which you sent the payments,
- Your name when you made the payments, and
- Your social security number.
The statement should cover payments you made jointly with your spouse as well as any
you made separately.
Separate Returns
If you and your spouse made separate estimated tax payments for 2002 and you file
separate returns, you can take credit only for your own payments.
If you made joint estimated tax payments, you must decide how to divide the payments
between your returns. One of you can claim all of the estimated tax paid and the other
none, or you can divide it in any other way you agree on. If you cannot agree, you must
divide the payments in proportion to each spouse's individual tax as shown on your
separate returns for 2001.
Divorced Taxpayers
If you made joint estimated tax payments for 2002, and you were divorced during the
year, either you or your former spouse can claim all of the joint payments, or you each
can claim part of them. If you cannot agree on how to divide the payments, you must divide
them in proportion to each spouse's individual tax as shown on your separate returns for
2002.
If you claim any of the joint payments on your tax return, enter your former spouse's
social security number (SSN) in the space provided on the front of Form 1040 or Form
1040A. If you divorced and remarried in 2002, enter your present spouse's SSN in that
space and write your former spouse's SSN, followed by DIV, to the left of line
63, Form 1040, or line 40, Form 1040A.
Underpayment Penalty
If you did not pay enough tax either through withholding or by making
estimated tax payments, you will have an underpayment of estimated tax and you may
have to pay a penalty. Generally, you will not have to pay a penalty for
2002 if any of the following situations applies.
- The total of your withholding and estimated tax payments was at least as much as your
2001 tax (or 112% of your 2001 tax if your adjusted gross income was more than $150,000 -
$75,000 if your 2002 filing status is married filing separately) and you paid all required
estimated tax payments on time.
- The tax balance due on your return is no more than 10% of your total 2002 tax, and you
paid all required estimated tax payments on time.
- Your total 2002 tax minus your withholding is less than $1,000.
- You did not have a tax liability for 2001.
- You did not have any withholding taxes and your current year tax less any household
employment taxes is less than $1,000.
Special rules apply if you are a farmer or fisherman. See Farmers and Fishermen in
chapter 4 of Publication 505 for more information.
IRS can figure the penalty for you. If you think you owe the penalty
but you do not want to figure it yourself when you file your tax return, you may not have
to. Generally, the IRS will figure the penalty for you and send you a bill. However, you
must complete Form 2210 and file it with your return if you are able to lower or eliminate
your penalty. See chapter 4 of Publication 505.
- Continue - |
