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Publication 505

and Estimated  



The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go. This publication explains both of these methods. It also explains how to take credit on your return for the tax that was withheld and for your estimated tax payments.
If you did not pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Generally, the IRS can figure this penalty for you. This underpayment penalty, and the exceptions to it, are discussed in chapter 4.
Nonresident aliens.(p2)
If you are a nonresident alien, see chapter 8 in Publication 519, U.S. Tax Guide for Aliens, for a discussion of Form 1040-ES (NR) and withholding.

What's new for 2010 and 2011.(p2)

See What's New for 2011 that begins on this page, and What's New in chapter 4 for 2010 changes.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

Internal Revenue Service 
Individual Forms and Publications Branch 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at * (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. You can also send us comments from, select "Comment on Tax Forms and Publications" under "Information about."
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p2)
Visit to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613

Tax questions.(p2)
If you have a tax question, check the information available on or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

What's New for 2011(p2)

Recent legislation (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) extended many of the tax provisions that were set to expire in 2010. This section lists only those provisions that were changed in addition to being extended, as well as those that were not extended. Also listed are tax benefits with adjustments for inflation. For more information, see

Income limits for excluding education savings bond interest increased.(p2)

In order to exclude interest, your modified adjusted gross income (MAGI) must be less than $86,100 ($136,650 if married filing jointly or qualifying widow(er)).

Foreign earned income exclusion.(p2)

The maximum exclusion has increased to $92,900.

Qualified charitable distribution (QCD).(p2)

Tax-free treatment of distributions from traditional and Roth IRAs for charitable purposes has been extended through December 31, 2011, with the following special rule. For QCDs made during January 2011, you can elect to have the distribution deemed to have been made on December 31, 2010. If you make this election, the QCD will count toward your 2010 exclusion limit of $100,000, as well as your 2010 minimum required distribution.

Standard mileage rates.(p2)

The rate for business use of your vehicle is increased to 51 cents per mile. The rate for use of your vehicle to get medical care or move is increased to 19 cents per mile. The rate of 14 cents per mile for charitable use is unchanged.

Personal exemption increased.(p2)

For tax years beginning in 2011, the personal exemption amount is increased to $3,700.

Alternative minimum tax (AMT) exemption amount increased.(p2)

The AMT exemption amount is increased to $48,450 ($74,450 if married filing jointly or qualifying widow(er); $37,225 if married filing separately).

Lifetime learning credit income limits increased.(p2)

In order to claim a lifetime learning credit, your MAGI must be less than $61,000 ($122,000 if married filing jointly).

Retirement savings contribution credit income limits increased.(p2)

In order to claim this credit, your MAGI must be less than $28,250 ($56,500 if married filing jointly; $42,375 if head of household).

Nonbusiness energy property credit.(p2)

This credit has been extended for 1 year with a reduced rate of 10%. Amounts provided by subsidized federal, state, or local energy financing do not qualify for the credit. The energy-efficiency standards for qualified natural gas, propane, or oil furnaces, or hot water boilers have been increased. For 2011, the credit is limited as follows.

Adoption credit or exclusion.(p2)

The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,360. In order to claim either the credit or exclusion, your MAGI must be less than $225,210.

Temporary decrease in employee's share of payroll tax.(p2)

Social security will be withheld from an employee’s wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. There will be no change to Medicare withholding.
The same reduction applies to net earnings from self-employment—the temporary rate will be 10.4% (down from 12.4%) up to the social security wage limit of $106,800.

Increase in additional tax on certain distributions not used for qualified medical expenses.(p2)

The tax on distributions from health savings accounts (HSAs) and Archer MSAs made after December 31, 2010, that are not used for qualified medical expenses, is increased to 20%.

Earned income credit (EIC).(p2)

You may be able to take the EIC in 2011 if:
Also, the maximum AGI you can have and still get the credit has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and get the credit has increased to $3,150.

Health coverage tax credit (HCTC).(p2)

Beginning after February 12, 2011, the credit has decreased to 65% (from 80%) for amounts paid for qualified health insurance coverage for you, your spouse, and other qualifying family members.

Expiring Tax Benefits(p2)

The following benefits are scheduled to expire or have been repealed and will not be available for 2011.



Roth IRAs.(p3)

If you rolled over or converted part or all of another retirement plan to a Roth IRA in 2010, or made an in-plan rollover to a designated Roth account after September 27, 2010, and did not elect to include all of the resulting taxable amount in income for 2010, you must report half of that taxable amount on your 2011 return and the other half on your 2012 return. See the Instructions for Form 8606 for more information.

Social security (FICA) tax.(p3)

Generally, each employer for whom you work during the tax year must withhold social security tax up to the annual limit. The annual limit is $106,800 in 2011.

Photographs of missing children.(p3)

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.