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IRS.gov Website
Publication 225
taxmap/pubs/p225-069.htm#en_us_publink1000218890

Chapter 15
Estimated Tax(p84)

taxmap/pubs/p225-069.htm#en_us_publink1000272059Introduction

Estimated tax is the method used to pay tax on income that is not subject to withholding. See Publication 505 for the general rules and requirements for paying estimated tax. If you are a qualified farmer, defined below, you are subject to the special rules covered in this chapter for paying estimated tax.

taxmap/pubs/p225-069.htm#TXMP7c89f56f

Useful items

You may want to see:


Publication
 505 Tax Withholding and Estimated Tax
Form (and Instructions)
 1040: U.S. Individual Income Tax Return
 1040-ES: Estimated Tax for Individuals
 2210-F: Underpayment of Estimated Tax by Farmers and Fishermen
See chapter 16 for information about getting publications and forms.
taxmap/pubs/p225-069.htm#en_us_publink1000218891

Special Estimated Tax Rules for Qualified Farmers(p84)

rule
Special rules apply to the payment of estimated tax by individuals who are qualified farmers. If you are not a qualified farmer as defined next, see Publication 505 for the estimated tax rules that apply.
taxmap/pubs/p225-069.htm#en_us_publink1000218892

Qualified Farmer(p84)

rule
An individual is a qualified farmer for 2012 if at least two-thirds of his or her gross income from all sources for 2011 or 2012 was from farming. See Gross Income, next, for information on how to figure your gross income from all sources and see Gross Income From Farming, later, for information on how to figure your gross income from farming. See also Percentage From Farming, later, for information on how to determine the percentage of your gross income from farming.
taxmap/pubs/p225-069.htm#en_us_publink1000218893

Gross Income(p84)

rule
Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from income tax. On a joint return, you must add your spouse's gross income to your gross income. To decide whether two-thirds of your gross income was from farming, use as your gross income the total of the following income (not loss) amounts from your tax return.
taxmap/pubs/p225-069.htm#en_us_publink1000218895

Gross Income From Farming(p84)

rule
Gross income from farming is income from cultivating the soil or raising agricultural commodities. It includes the following amounts.
Gross income from farming is the total of the following amounts from your tax return.
For more information about income from farming, see chapter 3.
EIC
Farm income does not include any of the following:
  • Wages you receive as a farm employee.
  • Income you receive from contract grain harvesting and hauling with workers and machines you furnish.
  • Gains you receive from the sale of farm land and depreciable farm equipment.
taxmap/pubs/p225-069.htm#en_us_publink1000218897

Percentage From Farming(p84)

rule
Figure your gross income from all sources, discussed earlier. Then figure your gross income from farming, discussed earlier. Divide your farm gross income by your total gross income to determine the percentage of gross income from farming.
taxmap/pubs/p225-069.htm#en_us_publink1000218898

Example 1.(p84)

Jane Smith had the following total gross income and farm gross income amounts in 2012.
Gross Income
 TotalFarm
Taxable interest$3,000 
Dividends500 
Rental income (Sch E)41,500 
Farm income (Sch F)75,000$75,000
Gain (Form 4797)5,0005,000
Total$125,000$80,000
Schedule D showed gain from the sale of dairy cows carried over from Form 4797 ($5,000) in addition to a loss from the sale of corporate stock ($2,000). However, that loss is not netted against the gain to figure Ms. Smith's total gross income or her gross farm income. Her gross farm income is 64% of her total gross income ($80,000 ÷ $125,000 = 0.64).
taxmap/pubs/p225-069.htm#en_us_publink1000218900

Special Rules for Qualified Farmers(p84)

rule
The following special estimated tax rules apply if you are a qualified farmer for 2012.
Figure 15-1 presents an overview of the special estimated tax rules that apply to qualified farmers.
taxmap/pubs/p225-069.htm#en_us_publink1000218901

Example 2.(p85)

Assume the same fact as in Example 1. Ms. Smith's gross farm income is only 64% of her total income. Therefore, based on her 2012 income, she does not qualify to use the special estimated tax rules for qualified farmers. However, she does qualify if at least two-thirds of her 2011 gross income was from farming.
taxmap/pubs/p225-069.htm#en_us_publink1000218902

Example 3.(p85)

Assume the same facts as in Example 1 except that Ms. Smith's farm income from Schedule F was $90,000 instead of $75,000. This made her total gross income $140,000 ($3,000 + $500 + $41,500 + $90,000 + $5,000) and her farm gross income $95,000 ($90,000 + $5,000). She qualifies to use the special estimated tax rules for qualified farmers, since 67.9% (at least two-thirds) of her gross income is from farming ($95,000 ÷ $140,000 = .679).
taxmap/pubs/p225-069.htm#en_us_publink1000218903

Required Annual Payment(p85)

rule
If you are a qualified farmer and must pay estimated tax for 2012, use the worksheet on Form 1040-ES to figure the amount of your required annual payment. Apply the following special rules for qualified farmers to the worksheet.