Individuals
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
What can I do to make sure I will not owe the IRS on my 2001 income tax return?
You can either increase the amount of income tax withheld from your pay or make estimated tax payments for 2002. You may change the amount of income tax withheld from your pay by filing a new Form W-4 (PDF), Employee's Withholding Allowance Certificate. Form 1040ES (PDF), Estimated Tax for Individuals, has a worksheet to see if you need to make estimated tax payments. For more details, refer to Tax Topic 355, Estimated Tax, or Publication 505 (PDF), Tax Withholding and Estimated Tax.
References: How do I know if I have to file quarterly individual estimated tax payments?
Estimated tax payments can be used to pay Federal income tax, self-employment tax, and household employment tax. To estimate if you need to pay tax on income not subject to withholding or on other income from which not enough tax is withheld, you need to calculate if the total tax you'll owe on your annual income tax return will be covered by the amount of tax you have already had either: - withheld from wages and other payments, or
- paid in earlier estimated payments for the year, or
- credited to your account from adjustments or overpayments to previously filed returns.
Generally, you should make estimated tax payments if you will owe tax of $1,000 or more, after withholding and credits, and the total amount of tax withheld and your credits will be less than the smaller of: - 90% of the tax to be shown on your current tax return, or
- 100% of the tax shown on your prior year's tax return, if your prior year's tax return covered all 12 months of the year. However, if your prior year's adjusted gross income exceeded $150,000, or $75,000 if you filed a separate return from your spouse, then you must pay 110% instead of 100% of last year's tax. (Note: the percentages change depending on the tax year. Refer to Publication 505 (PDF), Tax Withholding and Estimated Tax.)
Estimated tax requirements are different for farmers and fishermen. Publication 505 (PDF), Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules and about estimated tax in general. Get Form 1040ES (PDF), Estimated Tax for Individuals, to help you figure your estimated tax liability for 2002.
References: How do I calculate the amount of estimated tax I will owe?
You should get Form 1040ES (PDF), Estimated Tax for Individuals and complete the worksheet on page 4, to help you figure your estimated tax liability.
References: Are all the quarterly estimated tax payments the same amount?
Normally, you determine your tax at the first of the year and divide by 4 but this can change as your income may change for a certain quarter. If your income fluctuates during the year, you should complete the 2002 Annualized Estimated Tax Worksheet in Publication 505 (PDF), Tax Withholding and Estimated Tax. The worksheet annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred since the beginning of the tax year through the end of the period. Use the result you figure on line 25d to make your estimated tax payments and complete your payment-vouchers.
References: Do self-employment taxes need to be paid quarterly or yearly?
Self-employment tax is paid by making quarterly estimated tax payments which include both income tax and social security tax.
References: What form will I use to make estimated payments?
Use Form 1040ES (PDF), Estimated Tax for Individuals, to estimate your tax liability. Four payment vouchers are included in the 1040ES package that are used to send your payment to the Internal Revenue Service
References: Can I combine my estimated tax payment with the payment for my Form 1040?
Estimated tax payments should not be sent with or be included in checks or money orders for payment of Federal income tax with your return. Mail your estimated tax payments separately to the address shown in the Instructions for Form 1040ES. For additional information on ensuring proper credit of payments, refer to Tax Topic 158, Ensuring Proper Credit of Payments.
References: When are the quarterly estimated tax returns due?
Your first estimated tax payment is usually due the 15th of April. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments. The four payments are due April 15th, June 15th, September 15, and January 15th of the following year.
If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday. For example, a payment due Sunday, June 15, 2003, will be on time if you make it by Monday, June 16, 2003.
References: Where do I send my individual estimated tax payments?
Where you send your individual estimated tax payments depends on where you live. Refer to Form 1040ES (PDF) , page 6 for the correct mailing address.
References: How do I report the estimated payments I have made when I file my taxes at the end of the year?
Take credit for all your estimated tax payments for 2002 on line 63 of Form 1040 (PDF), U.S. Individual Income Tax Return, or line 38 of Form 1040A (PDF), U.S. Individual Income Tax Return.
References: Can I make my quarterly individual estimated tax payments by credit card?
You can generally pay part or all of your estimated tax by using a credit card (American Express Card®, MasterCard®, or Discover Card®). There are two credit card processors (also referred to as service providers) which offer this service: Official Payments Corporation and PhoneCharge, Inc. Both providers will charge you a convenience fee using a tiered fee schedule which can be found on their web sites. The IRS will not receive this fee. You can look up the amount of the convenience fee at http://www.official payments.com or, if you choose to use PhoneCharge Inc., at http:/wwwAbout1888ALLTAXX.com.
By phone, Official Payments Corporation can be reached at 1-888-272-9829 (1-888-2PAY-TAX) toll-free. Similarly, you may call PhoneCharge, Inc. at 1-888-255-8299 (1-888-ALL-TAXX). You will be told the amount of the convenience fee during the call. Then, you will have the option to continue or cancel the call. If you decide to continue, you will be given a confirmation number at the end of the call. Make a record of the confirmation number. Do not include the amount of the convenience fee as part of the estimated tax payment. There is nothing to send in when you pay by credit card.
I'm concerned because my check payment to the IRS has not been cashed yet. What should I do?
You may call 1-800-829-0922 and ask an IRS representative if the payment has been credited to your account. If it has not, you may choose to place a stop-payment on the original check and reissue the payment.
I was self-employed for the first half of the year and made estimated tax payments. Now, I am a wage earner and my employer withholds taxes. Must I continue to make estimated tax payments?
In general, you may owe a penalty for 2002 if the total of your withholding and estimated tax payments did not equal at least the smaller of: - 90% of your 2002 tax, or
- 100%* of your 2001 tax. (Your 2001 tax return must cover a 12-month period.)
If your timely and correct estimated tax payments plus the Federal withholding from your wages meet the estimated tax requirements shown above, you will not need to make any additional payments for estimated tax, nor will you need to inform the IRS of the change.
*If the total amount of your withholding and estimated tax payments equalled 100% of your 2001 income tax liability, you will not be subject to the failure to pay estimated tax penalty. However, not making additional estimated tax payments may mean that you have a large income tax liability when you file your income tax return. (If you are a higher income taxpayer with a AGI of more than $150,000 ($75,000 if your filing status is married filing separate)), substitute 112% for 100% if last year is 2001. Note: the percentage change depending on the tax refer to Publication 505 (PDF) , Tax Withholding and Estimated Tax.
References: I filed a quarterly 1040-ES in April and paid the difference between my total tax bill last year and this year's withholdings. Therefore, I believe I have paid the minimum amount of estimated tax payments. Do I have to submit a Form 1040-ES for the, second, third, and fourth quarters?
Since you have paid 100%* of your prior year income tax liability, you will not be subject to the failure to pay estimated tax penalty. However, not making additional estimated tax payments may mean that you have a large income tax liability when you do file your income tax return.
(*If you are a higher income taxpayer (with an AGI of more than $150,000 ($75,000 if your filing status is married filing separate)), substitute 112% for 100%.) (if last year is 2001) (Note: the percentages change depending on the tax year. Refer to Publication 505 (PDF), Tax Withholding and Estimated Tax.)
References: Is there a way to have Federal income tax withheld from unemployment compensation, in lieu of making estimated tax payments?
You may have Federal income tax withheld from unemployment compensation by filing Form W-4V (PDF), Voluntary Withholding Request. For additional information on unemployment compensation, refer to Tax Topic 418, Unemployment Compensation.
References:
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