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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 2009 and 2010.(p2)


See What's New for 2010 that begins on this page, and What's New in chapters 3 and 4 for 2009 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. Although we cannot respond individually to each email, 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 2010(p2)


Use your 2009 tax return as a guide in figuring your 2010 estimated tax, but be sure to consider the following. Only some of the amounts in the following paragraphs have changed from 2009, but some unchanged amounts are provided here for your convenience.

Limit on deductible farming losses.(p2)

Beginning in 2010, the farming loss of a taxpayer (other than a C corporation) who receives certain government subsidies will be limited to the greater of $300,000 ($150,000 if married filing separately) or the taxpayer's total net farm income for the prior 5 tax years. Farming losses caused by casualty, disease, or drought are disregarded in calculating the limitation. Disallowed amounts can be carried forward indefinitely.

Roth IRAs.(p2)

Half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010. In addition, for any tax year beginning after 2009, you can make a qualified rollover contribution to a Roth IRA regardless of the amount of your modified adjusted gross income (AGI).

IRA deduction expanded.(p2)

You may be able to take an IRA deduction if you were covered by a retirement plan and your 2010 modified AGI is less than $66,000 ($109,000 if married filing jointly or qualifying widow(er)). If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2010 modified AGI is less than $177,000.

Domestic production activities income deduction.(p2)

The deduction rate for 2010 increases to 9%. However, the deduction is reduced if you have oil-related qualified production activities income.

Personal casualty and theft loss limit reduced.(p2)

Each personal casualty or theft loss is limited to the excess of the loss over $100 (instead of $500).

Standard mileage rates.(p2)

The rate for business use of your vehicle is reduced to 50 cents a mile. The rate for use of your vehicle to get medical care or move is reduced to 161/2 cents a mile. The rate of 14 cents a mile for charitable use is unchanged.

Personal exemption and itemized deduction phaseouts.(p2)

For 2010, taxpayers with AGI above a certain amount will not lose part of their deduction for personal exemptions and itemized deductions. Under current law, these phaseouts will resume in 2011.

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

The AMT exemption amount is decreased to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).

Certain credits not allowed against the AMT.(p2)

The credit for child and dependent care expenses, credit for the elderly or the disabled, lifetime learning credit, nonbusiness energy property credit, mortgage interest credit, and the District of Columbia first-time homebuyer credit are not allowed against the AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.

Qualified fuel cell motor vehicle credit reduced.(p2)

For qualified vehicles with a gross vehicle weight rating of 8,500 pounds or less that are placed in service after 2009, the credit allowed for the purchase is reduced by 50%. For more information, see the instructions for Form 8910.

Earned income credit (EIC).(p2)

You may be able to take the EIC if:
The maximum AGI you can have and still get the credit also 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 still get the credit is still $3,100.

First-time homebuyer credit.(p2)

This credit has been extended for purchases of a main home in the United States after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010). The credit is generally 10% of the purchase price of the home but is limited to $8,000 ($4,000 if married filing separately).
Also, the credit has been modified to allow a smaller credit (limited to $6,500, $3,250 if married filing separately) if you (and your spouse if married) owned and used the same main home for any period of 5 consecutive years during the 8-year period ending on the date you bought your new main home in the United States. For this credit, the replacement home must be purchased after November 6, 2009, and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010).
You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit.
See Form 5405 (Rev. December 2009) for more information, including special rules for certain members of the uniformed services, members of the U.S. Foreign Service, and employees of the intelligence community on official extended duty service.



Recapture of first-time homebuyer credit.(p2)

If you claimed the first-time homebuyer credit for a home you bought in 2008, you generally must begin repaying it in 2010.

Charitable contribution for Haiti earthquake.(p2)

You were allowed to deduct on your 2009 tax return certain cash contributions made for the relief of Haiti earthquake victims. The contributions must have been made after January 11, 2010 and before March 1, 2010. If you took a deduction for these contributions on your 2009 return, do not claim the same deduction when estimating your 2010 taxable income for withholding or estimated tax purposes.

Expiring Tax Benefits(p3)

The following benefits are scheduled to expire and will not be available for 2010.
At the time these instructions went to print, Congress was considering legislation that would extend some of these benefits. To find out if legislation was enacted, and for details, go to




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 2010.

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.