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Taxmap/pubs/p505-011.htm#TXMP4945db87 Who Must Pay   Estimated Tax

Who Must Pay Estimated Tax

If you had a tax liability for 2004, you may have to pay estimated tax for 2005.

Taxmap/pubs/p505-011.htm#TXMP04b18e5c General Rule

You must pay estimated tax for 2005 if both of the following apply.

1. You expect to owe at least $1,000 in tax for 2005, after subtracting your withholding and credits, and
2. You expect your withholding and credits to be less than the smaller of:
   1. 90% of the tax to be shown on your 2005 tax return, or
   2. 100% of the tax shown on your 2004 tax return. Your 2004 tax return must cover all 12 months.

If all your income will be subject to income tax withholding, you probably do not need to pay estimated tax.

Taxmap/pubs/p505-011.htm#TXMP4b25ad20
Example 2.1.

To figure whether she should pay estimated tax for 2005, Jane, who files as head of household, uses the following information.

Expected AGI for 2005	$61,125
AGI for 2004	$58,950
Tax shown on 2004 return	$10,500
Tax expected to be shown on 2005 return	$11,500
Tax expected to be withheld in 2005	$10,400

Jane uses Figure B (on the next page). Jane's answer to the chart's first question is YES, she expects to owe at least $1,000 for 2005 after subtracting her withholding from her expected tax ($11,500 − $10,400 = $1,100). Her answer to the chart's second question is also YES, she expects her income tax withholding ($10,400) to be at least 90% of the tax to be shown on her 2005 return ($11,500 × 90% = $10,350). Jane does not need to pay estimated tax.

Taxmap/pubs/p505-011.htm#TXMP6008fee3
Example 2.2.

The facts are the same as in Example 2.1, except that Jane expects only $8,500 tax to be withheld in 2005. Because that is less than $10,350, her answer to the chart's second question is NO.

Jane's answer to the chart's third question is also NO, she does not expect her income tax withholding ($8,500) to be at least 100% of the tax shown on her 2004 return ($10,500). Jane must pay estimated tax for 2005.

Taxmap/pubs/p505-011.htm#TXMP7913cfa2
Example 2.3.

The facts are the same as in Example 2.2, except that the tax shown on Jane's 2004 return was $8,000. Because she expects to have more than $8,000 withheld in 2005, her answer to the chart's third question is YES. Jane does not need to pay estimated tax for 2005.

Taxmap/pubs/p505-011.htm#TXMP5286b285 Married Taxpayers

Married Taxpayers

To figure whether you must pay estimated tax, apply the rules discussed here to your separate estimated income. If you can make joint estimated tax payments, you can apply these rules on a joint basis.

You and your spouse can make joint estimated tax payments even if you are not living together.

You and your spouse cannot make joint estimated tax payments if:

• You are legally separated under a decree of divorce or separate maintenance,
• Either spouse is a nonresident alien, or
• You and your spouse have different tax years.

Whether you and your spouse make joint estimated tax payments or separate payments will not affect your choice of filing a joint tax return or separate returns for 2005.

Taxmap/pubs/p505-011.htm#TXMP0e804c4a 2004 separate returns and 2005 joint return.

If you plan to file a joint return with your spouse for 2005, but you filed separate returns for 2004, your 2004 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/pubs/p505-011.htm#TXMP63af0006 2004 joint return and 2005 separate returns.

If you plan to file a separate return for 2005, but you filed a joint return for 2004, your 2004 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 a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2004 using the same filing status as for 2005. Then multiply the tax on the joint return by the following fraction:

	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

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Example 2.4.

Joe and Heather filed a joint return for 2004 showing taxable income of $48,500 and a tax of $6,564. Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. For 2005, they plan to file married filing separately. Joe figures his share of the tax on the 2004 joint return as follows:

Tax on $40,100 based on a separate return	$6,769
Tax on $8,400 based on a separate return	906
Total	$7,675
Joe's percentage of total ($6,769 ÷ $7,675)	88%
Joe's share of tax on joint return ($6,564 × 88%)	$5,776

Taxmap/pubs/p505-011.htm#TXMP57c5e773 Special Rules for Farmers and Fishermen and Higher Income Taxpayers

Farmers and Fishermen and Higher Income Taxpayers, Special Rules

There are special rules for farmers, fishermen, and certain higher income taxpayers.

Taxmap/pubs/p505-011.htm#TXMP1802f5f5 Farmers and Fishermen

Farmers and Fishermen

If at least two-thirds of your gross income for 2004 or 2005 is from farming or fishing, substitute 662/3% for 90% in 2a) under General Rule, earlier.

For definitions of gross income from farming and gross income from fishing, see Farmers and Fishermen later under When To Pay Estimated Tax.

Taxmap/pubs/p505-011.htm#TXMP75ff55dd Higher Income Taxpayers

Higher Income Taxpayers

If your adjusted gross income (AGI) for 2004 was more than $150,000 ($75,000 if your filing status for 2005 is married filing a separate return), substitute 110% for 100% in 2b) under General Rule, earlier. This rule does not apply to farmers and fishermen.

For 2004, AGI is the amount shown on Form 1040, line 36; Form 1040A, line 21; and Form 1040EZ, line 4.

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Figure B: Do You Have To Pay Estimated Tax Algorithm   

Taxmap/pubs/p505-011.htm#TXMP156bfd36 Aliens

Alien

Resident and nonresident aliens may also have to pay estimated tax. Resident aliens should follow the rules in this publication, 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 if you either have a green card or meet the substantial presence test. For more information about the substantial presence test, see Publication 519.

Taxmap/pubs/p505-011.htm#TXMP6654f5d8 Estates and Trusts

Estates and Trusts

Estates and trusts also must pay estimated tax. However, estates (and certain grantor trusts that receive the residue of the decedent's estate under the decedent's will) are exempt from paying estimated tax for the first two years after the decedent's death.

Estates and trusts must use Form 1041-ES, Estimated Income Tax for Estates and Trusts, to figure and pay estimated tax.

Previous Page:  Publication 505 - Tax Withholding and Estimated Tax - Estimated Tax for 2005 Next Page:  Publication 505 - Tax Withholding and Estimated Tax - How To Figure Estimated Tax Use     to find additional instances of index items.