Contents Introduction  ........................................ 1 Important Changes for 1999   ............. 2 Important Changes for 2000   ............. 2 Chapter 1.   Tax Withholding for 2000  ........... 3 Salaries and Wages  ....................... 3 Tips ................................................. 11 Taxable Fringe Benefits .................. 11 Sick Pay  .......................................... 13 Pensions and Annuities  .................. 13 Gambling Winnings ......................... 14 Unemployment Compensation  ....... 14 Federal Payments ........................... 15 Backup Withholding  ........................ 15 2.   Estimated Tax for 2000  ............... 16 Who Must Make Estimated Tax Payments? ............................... 16 How To Figure Estimated Tax ........ 17 2000 Estimated Tax Worksheet  ..... 20 When To Pay Estimated Tax  ......... 21 How To Figure Each Payment  ....... 22 2000 Annualized Estimated Tax Worksheet ................................ 24 How To Pay Estimated Tax ............ 26 Illustrated Examples  ....................... 26 2000 Tax Rate Schedules  .............. 31 2000 Standard Deduction Tables  ... 32 3.   Credit for Withholding and Estimated Tax for 1999  ............... 33 Withholding ..................................... 33 Estimated Tax  ................................. 34 Excess Social Security or Railroad Retirement Tax Withholding  .... 34 4.   Underpayment Penalty for 1999 36 General Rule ................................... 36 Exceptions  ...................................... 37 Figuring Your Required Annual Payment ................................... 37 Short Method for Figuring the Penalty ..................................... 38 Regular Method for Figuring the Penalty ..................................... 38 Farmers and Fishermen  ................. 41 Waiver of Penalty  ........................... 41 5.    How To Get More Information  .. 47 Index  .................................................... 48 Introduction The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or re- ceive income during the year.   There are two ways to pay as you go. •  Withholding. If you are an employee, your employer probably withholds income tax from your pay. Tax may also be withheld from certain other income — in- cluding pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the Internal Revenue Service (IRS) in your name. •  Estimated tax. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to Department of the Treasury Internal Revenue Service Publication 505 (Rev. December 1999) Cat. No. 15008E Tax Withholding and Estimated Tax