Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax
, later), you may be charged a penalty even if you are due a refund when you file your tax return. For information on when the penalty applies, see Underpayment Penalty for 2009
, at the end of this chapter.
If you receive salaries or wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, give a new Form W-4 to your employer. See chapter 1 of Publication 505. taxmap/pub17/p17-021.htm#en_us_publink100032384
You do not have to pay estimated tax for 2010 if you meet all three of the following conditions.
- You had no tax liability for 2009.
- You were a U.S. citizen or resident for the whole year.
- Your 2009 tax year covered a 12-month period.
You had no tax liability for 2009 if your total tax was zero or you did not have to file an income tax return. For the definition of "total tax," see Total tax for 2009—line 14b in Publication 505, chapter 2.taxmap/pub17/p17-021.htm#en_us_publink100032385
If you owe additional tax for 2009, you may have to pay estimated tax for 2010.
You can use the following general rule as a guide during the year to see if you will have enough withholding, or if you should increase your withholding or make estimated tax payments.taxmap/pub17/p17-021.htm#en_us_publink100032386
In most cases, you must pay estimated tax for 2010 if both of the following apply.
- You expect to owe at least $1,000 in tax for 2010, after subtracting your withholding and refundable credits.
- You expect your withholding plus your refundable credits to be less than the smaller of:
- 90% of the tax to be shown on your 2010 tax return, or
- 100% of the tax shown on the your 2009 tax return. Your 2009 tax return must cover all 12 months.
If the result from using the general rule above suggests that you will not have enough withholding, complete the 2010 Estimated Tax Worksheet in the instructions to Form 1040-ES for a more accurate calculation.
If at least two-thirds of your gross income for 2009 or 2010 is from farming or fishing, substitute 662
% for 90% in (2a) under the General Rule
earlier. If your AGI for 2009 was more than $150,000 ($75,000 if your filing status for 2010 is married filing a separate return), substitute 110% for 100% in (2b) under General rule
, earlier. See Figure 4-A
, later, and Publication 505, chapter 2 for more information.
Resident and nonresident aliens also may have to pay estimated tax. Resident aliens should follow the rules in this chapter unless noted otherwise. Nonresident aliens should get Form 1040-ES (NR), U.S. Estimated Tax for Nonresident Alien Individuals.
You are an alien if you are not a citizen or national of the United States. You are a resident alien if you either have a green card or meet the substantial presence test. For more information about the substantial presence test, see Publication 519, U.S. Tax Guide for Aliens. taxmap/pub17/p17-021.htm#en_us_publink100032389
If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income.
You and your spouse can make joint estimated tax payments even if you are not living together.
However, you and your spouse cannot make joint estimated tax payments if:
- You are legally separated under a decree of divorce or separate maintenance,
- You and your spouse have different tax years, or
- Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien for tax purposes (see chapter 1 of Publication 519)).
If you do not qualify to make joint estimated tax payments, apply these rules to your separate estimated income. Making joint or separate estimated tax payments will not affect your choice of filing a joint tax return or separate returns for 2010. taxmap/pub17/p17-021.htm#en_us_publink100032390
If you plan to file a joint return with your spouse for 2010, but you filed separate returns for 2009, your 2009 tax is the total of the tax shown on your separate returns. You filed a separate return if you filed as single, head of household, or married filing separately. taxmap/pub17/p17-021.htm#en_us_publink100032391
If you plan to file a separate return for 2010 but you filed a joint return for 2009, your 2009 tax is your share of the tax on the joint return. You file a separate return if you file as single, head of household, or married filing separately.
To figure your share of the tax on the joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2009 using the same filing status as for 2010. Then multiply the tax on the joint return by the following fraction. taxmap/pub17/p17-021.htm#w10311g12
| ||The tax you would have paid had you filed a separate return|| |
|The total tax you and your spouse would have paid had you filed separate returns|
Joe and Heather filed a joint return for 2009 showing taxable income of $48,500 and a tax of $6,444. Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. For 2010, they plan to file married filing separately. Joe figures his share of the tax on the 2009 joint return as follows.
| ||Tax on $40,100 based on a separate return||$6,219|| |
| ||Tax on $8,400 based on a separate return|| 846 || |
| ||Total||$ 7,065|| |
| ||Joe's percentage of total ($6,219 ÷ $7,065)||88%|| |
| ||Joe's share of tax on joint return |
($6,444 × 88%)
| $ 5,671 || | taxmap/pub17/p17-021.htm#en_us_publink100032394
To figure your estimated tax, you must figure your expected adjusted gross income (AGI), taxable income, taxes, deductions, and credits for the year.
When figuring your 2010 estimated tax, it may be helpful to use your income, deductions, and credits for 2009 as a starting point. Use your 2009 federal tax return as a guide. You can use Form 1040-ES to figure your estimated tax. Nonresident aliens use Form 1040-ES (NR) to figure estimated tax (see chapter 8 of Publication 519 for more information).
You must make adjustments both for changes in your own situation and for recent changes in the tax law. For 2010, there are several changes in the law. For a discussion of these changes, visit the IRS website at www.irs.gov
Form 1040-ES includes a worksheet to help you figure your estimated tax. Keep the worksheet for your records.
For more complete information and examples of how to figure your estimated tax for 2010, see chapter 2 of Publication 505. taxmap/pub17/p17-021.htm#en_us_publink100032395
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return. The payment periods and due dates for estimated tax payments are shown next.
| || For the period: || Due date: || |
| ||Jan. 1* – March 31||April 15|| |
| ||April 1 – May 31||June 15|| |
| ||June 1 – August 31||Sept. 15|| |
| ||Sept. 1– Dec. 31||January 15 next year**|| |
| ||*If your tax year does not begin on January 1, |
see the Form 1040-ES instructions.
**See January payment , later.
If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday. In 2011, January 15 is a Saturday and Monday, January 17, is a holiday. The January 15 payment is due by January 18, 2011.taxmap/pub17/p17-021.htm#en_us_publink100032397
If you file your 2010 Form 1040 or Form 1040A by January 31, 2011, and pay the rest of the tax you owe, you do not need to make the payment due on January 18, 2011. taxmap/pub17/p17-021.htm#en_us_publink100032398
If your tax year does not start on January 1, see the Form 1040-ES instructions for your payment due dates. taxmap/pub17/p17-021.htm#en_us_publink100032399
You do not have to make estimated tax payments until you have income on which you will owe the tax. If you have income subject to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period. You can pay all your estimated tax at that time, or you can pay it in installments. If you choose to pay in installments, make your first payment by the due date for the first payment period. Make your remaining installment payments by the due dates for the later periods. taxmap/pub17/p17-021.htm#en_us_publink100032400
If you do not have income subject to estimated tax until a later payment period, you must make your first payment by the due date for that period. You can pay your entire estimated tax by the due date for that period or you can pay it in installments by the due date for that period and the due dates for the remaining periods. The following chart shows when to make installment payments.
| If you first have income on which you must pay estimated tax: || Make a|
| Make later|
|Before April 1||April 15||June 15|
Jan. 15 next year
|April 1–May 31||June 15||Sept. 15|
Jan. 15 next year
|June 1–Aug. 31||Sept. 15||Jan. 15 next year|
|After Aug. 31||Jan. 15|
To determine how much you should pay by each payment due date, see How To Figure Each Payment, next.taxmap/pub17/p17-021.htm#en_us_publink100032402
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 chapter 2 of Publication 505. If you do not pay enough during each payment period, you may be charged a penalty even if you are due a refund when you file your tax return. taxmap/pub17/p17-021.htm#en_us_publink100032403
Under the regular installment method, if your estimated tax payment for any period is less than one-fourth of your estimated tax, you may be charged a penalty for underpayment of estimated tax for that period when you file your tax return. Under the annualized income installment method, your estimated tax payments vary with your income, but the amount required must be paid each period. See chapter 4 of Publication 505 for more information.taxmap/pub17/p17-021.htm#en_us_publink100032404
After you make an estimated tax payment, changes in your income, adjustments, deductions, credits, or exemptions may make it necessary for you to refigure your estimated tax. Pay the unpaid balance of your amended estimated tax by the next payment due date after the change or in installments by that date and the due dates for the remaining payment periods.taxmap/pub17/p17-021.htm#en_us_publink100032405
You do not have to pay estimated tax if your withholding in each payment period is at least as much as:
- One-fourth of your required annual payment, or
- Your required annualized income installment for that period.
You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you owe with your return under $1,000.
There are five ways to pay estimated tax.
- Credit an overpayment on your 2009 return to your 2010 estimated tax.
- Send in your payment (check or money order) with a payment voucher from Form 1040-ES.
- Pay electronically using the Electronic Federal Tax Payment System (EFTPS).
- Pay by electronic funds withdrawal if you are filing Form 1040 or Form 1040A electronically.
- Pay by credit or debit card using a pay-by-phone system or the Internet.
If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2009, you can apply part or all of it to your estimated tax for 2010. On line 74 of Form 1040, or line 47 of Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. Take the amount you have credited into account when figuring your estimated tax payments.
You cannot have any of that amount refunded to you until you file your tax return for the following year. You also cannot use that overpayment in any other way. taxmap/pub17/p17-021.htm#en_us_publink100032408
Each payment of estimated tax by check or money order must be accompanied by a payment voucher from Form 1040-ES. If you made estimated tax payments last year and did not use a paid preparer to file your return, you should receive a copy of the 2010 Form 1040-ES in the mail. It will contain 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.
Use the window envelopes that came with your Form 1040-ES package. If you use your own envelopes, make sure you mail your payment vouchers to the address shown in the Form 1040-ES instructions for the place where you live.
If you did not pay estimated tax last year, you can order Form 1040-ES from the IRS (see inside back cover of this publication) or download it from the IRS website at www.irs.gov
. Follow the instructions in the package to make sure you use the vouchers correctly.
Do not use the address shown in the Form 1040 or Form 1040A instructions.
If you file a joint return and are making joint estimated tax payments, enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return.taxmap/pub17/p17-021.htm#en_us_publink100032410
You must notify the IRS if you are making estimated tax payments and you changed your address during the year. Send a clear and concise written statement to the Internal Revenue Service Center where you filed your last return and provide all of the following.
- Your full name (and spouse's full name).
- Your signature (and spouse's signature).
- Your old address (and spouse's old address if different).
- Your new address.
- Your social security number (and spouse's social security number).
You can use Form 8822, Change of Address, for this purpose.
If you want to make estimated payments by using EFTPS, by electronic funds withdrawal, or by credit or debit card, see the Form 1040-ES instructions or How To Pay Estimated Tax in chapter 2 of Publication 505.