How To Pay Estimated Tax

There are five ways to pay estimated tax.

1. By crediting an overpayment on your 2000 return to your 2001 estimated tax.
2. By sending in your payment with a payment-voucher from Form 1040-ES.
3. By paying electronically using the Electronic Federal Tax Payment System (EFTPS). For EFTPS information, call 1-800-945-8400 or 1-800-555-4477.
4. By direct debit if you are filing Form 1040 or Form 1040A electronically.
5. By credit card using a pay-by-phone system.

In addition, if you are a beneficiary of an estate or trust, and the trustee elects to credit 2001 trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, 2002.

Crediting an Overpayment

When you file your Form 1040 or Form 1040A for 2000 and you have an overpayment of tax, you can apply part or all of it to your estimated tax for 2001. On line 68 of Form 1040, or line 43 of Form 1040A, write the amount you want credited to your estimated tax rather than refunded. The amount you have credited should be taken into account when figuring your estimated tax payments.

You can use all the credited amount toward your first payment, or you can spread it out in any way you choose among any or all of your payments.

If you ask that an overpayment be credited to your estimated tax for the next year, the payment is considered to have been made on the due date of the first estimated tax installment (April 15 for calendar year taxpayers). You cannot have any of that amount refunded to you after that due date until the close of that tax year. You also cannot use that overpayment in any other way after that date.

Example 2.8. When Kathleen finished filling out her 2000 tax return, she saw that she had overpaid her taxes by $750. Kathleen knew she would owe additional tax in 2001. She credited $600 of the overpayment to her 2001 estimated tax and had the remaining $150 refunded to her.

In September, she amended her 2000 return by filing Form 1040X, Amended U.S. Individual Income Tax Return. It turned out that she owed $250 more in tax than she had thought. This reduced her 2000 overpayment from $750 to $500. Because the $750 had already been applied to her 2001 estimated tax or refunded to her, the IRS billed her for the additional $250 she owed, plus penalties and interest. Kathleen could not use any of the $600 she had credited to her 2001 estimated tax to pay this bill.

Using the Payment-Vouchers

Each payment of estimated tax must be accompanied by a payment-voucher from Form 1040-ES. If you made estimated tax payments last year, you should receive a copy of the 2001 Form 1040-ES in the mail. It will have 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.

If you did not pay estimated tax last year, you will have to get a copy of Form 1040-ES from the IRS. See chapter 5. After you make your first payment, a Form 1040-ES package with the preprinted vouchers will be mailed to you. Follow the instructions in the package to make sure you use the vouchers correctly.

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. Do not use the address shown in the Form 1040 or Form 1040A instructions.

If you file a joint return and you are making joint estimated tax payments, please enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return.

Change of address. You must notify the IRS if you are making estimated tax payments and you changed your address during the year. You must send a clear and concise written statement to the IRS Center where you filed your last return and provide all of the following:

• Your full name (and your spouse's full name),
• Your signature (and spouse's signature),
• Your old address (and spouse's old address if different),
• Your new address, and
• Your social security number (and spouse's social security number).

You can use Form 8822, Change of Address, for this purpose.

You can continue to use your old pre-printed payment-vouchers until the IRS sends you new ones. However, do not correct the address on the old voucher.

Payment by Direct Debit

You can make a 2001 estimated tax payment when you electronically file your 2000 Form 1040 or Form 1040A by authorizing a direct debit payment from your checking or savings account. Whether or not you have a balance due on your electronically filed tax return, you can schedule one estimated tax payment with an effective date of April 16, 2001, or June 15, 2001, or September 17, 2001. Do not send in a Form 1040-ES payment voucher when you schedule an estimated tax payment by direct debit.

Payment by Credit Card

You can use your American Express® Card, Discover® Card, or MasterCard® card to make estimated tax payments. Call toll free or access by Internet one of the service providers listed below and follow the instructions of the provider. Each provider will charge a convenience fee based on the amount you are paying. You can find out what the fee will be by calling the provider's toll-free automated customer service number or visiting the provider's Web Site shown below.

Official Payments Corporation
1-800-2PAY-TAX (1-800-272-9829)
1-877-754-4413 (Customer Service)
www.officialpayments.com

PhoneCharge, Inc.
1-888-ALLTAXX (1-888-255-8299)
1-877-851-9964 (Customer Service)
www.About1888ALLTAXX.com

See the Form 1040-ES instructions for more information.

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