||2008 Tax Year
Tax Withholding and Estimated Tax
Tax law changes for 2009. When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law
changes effective in 2009. See
What's New for 2009
in the front of this publication, or get Publication 553, Highlights of 2008 Tax Changes.
Estimated tax safe harbor for higher income taxpayers. If your adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you will have
to deposit the smaller of 90% of your expected tax for 2009 or 110% of the tax shown on your 2008 return to avoid an estimated
Payment of estimated tax electronically. You may be able to pay your estimated tax by electronic means. For more information, see How To Pay Estimated Tax in chapter 2 of Publication 505.
This chapter discusses how to pay your tax as you earn or receive income during the year. In general, the federal income tax
is a pay-as-you-go tax. 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 also may be withheld from certain
other income, including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to
the 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 pay estimated tax. People
who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you
receive income such as dividends, interest, capital gains, rent, and royalties. Estimated tax is used to pay not only income
tax, but self-employment tax and alternative minimum tax as well.
This chapter explains these methods. In addition, it also explains the following.
Credit for withholding and estimated tax. When you file your 2008 income tax return, take credit for all the income tax withheld from your salary, wages, pensions,
etc., and for the estimated tax you paid for 2008.
Underpayment penalty. 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. In most cases, the IRS can figure this penalty for you. See
at the end of this chapter.
Useful Items - You may want to see:
Tax Withholding and Estimated Tax
Highlights of 2008 Tax Changes
How Do I Adjust My Tax Withholding?
Form (and Instructions)
Employee's Withholding Allowance Certificate
Withholding Certificate for Pension or Annuity Payments
Request for Federal Income Tax Withholding From Sick Pay
Voluntary Withholding Request
Estimated Tax for Individuals
Underpayment of Estimated Tax by Individuals, Estates, and Trusts
This section discusses income tax withholding on:
Salaries and wages,
Taxable fringe benefits,
Pensions and annuities,
Unemployment compensation, and
Certain federal payments, such as social security.
This section explains in detail the rules for withholding tax from each of these types of income.
This section also covers backup withholding on interest, dividends, and other payments.
Income tax is withheld from the pay of most employees. Your pay includes your regular pay, bonuses, commissions, and vacation
allowances. It also includes reimbursements and other expense allowances paid under a nonaccountable plan. See
later, for more information about reimbursements and allowances paid under a nonaccountable plan.
If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. This
is explained under
Exemption From Withholding,
Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though
it is treated as a pension or annuity for other tax purposes.
If you are a household worker, you can ask your employer to withhold income tax from your pay.
Tax is withheld only if you want it withheld and your employer agrees to withhold it. If you do not have enough income
tax withheld, you may have to pay estimated tax, as discussed later under
Income tax generally is withheld from your cash wages for work on a farm unless your employer both:
Pays you cash wages of less than $150 during the year, and
Has expenditures for agricultural labor totaling less than $2,500 during the year.
You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. If
your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed
Determining Amount of Tax Withheld Using Form W-4
The amount of income tax your employer withholds from your regular pay depends on two things.
Form W-4 includes three types of information that your employer will use to figure your withholding.
Whether to withhold at the single rate or at the lower married rate.
How many withholding allowances you claim. (Each allowance reduces the amount withheld.)
Whether you want an additional amount withheld.
You must specify a filing status and a number of withholding allowances on Form W-4. You cannot specify only a dollar amount
When you start a new job, you must fill out Form W-4 and give it to your employer. Your employer should have copies of the
form. If you need to change the information later, you must fill out a new form.
If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld.
You may be able to avoid overwithholding if your employer agrees to use the part-year method. See Part-Year Method in chapter 1 of Publication 505 for more information.
Employee also receiving pension income.
If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer.
However, you can choose to split your withholding allowances between your pension and job in any manner. See Publication 919
for more information.
Changing Your Withholding
Events during the year may change your marital status or the exemptions, adjustments, deductions, or credits you expect to
claim on your tax return. When this happens, you may need to give your employer a new Form W-4 to change your withholding
status or number of allowances.
If the event changes your withholding status or the number of allowances you are claiming, you must give your employer a new
Form W-4 within 10 days after either of the following.
Your divorce, if you have been claiming married status.
Any event that decreases the number of withholding allowances you can claim.
Generally, you can submit a new Form W-4 whenever you wish to change the number of your withholding allowances for any other
Changing your withholding for 2010.
If events in 2009 will decrease the number of your withholding allowances for 2010, you must give your employer a
new Form W-4 by December 1, 2009. If the event occurs in December 2009, submit a new Form W-4 within 10 days.
Checking Your Withholding
After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too
little or too much. See
later. If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding.
You cannot give your employer a payment to cover withholding for past pay periods or a payment for estimated tax.
Completing Form W-4 and Worksheets
Form W-4 has worksheets to help you figure how many withholding allowances you can claim. The worksheets are for your own
records. Do not give them to your employer.
If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split
your allowances between the Forms W-4 for each job. You cannot claim the same allowances with more than one employer at the
same time. You can claim all your allowances with one employer and none with the other(s), or divide them any other way.
If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using
your combined income, adjustments, deductions, exemptions, and credits. Use only one set of worksheets. You can divide your
total allowances any way, but you cannot claim an allowance that your spouse also claims.
If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on
your own individual income, adjustments, deductions, exemptions, and credits.
Alternative method of figuring withholding allowances.
You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding
allowances. For more information, see Alternative method of figuring withholding allowances
under Completing Form W-4 and Worksheets
in Publication 505, chapter 1.
Personal Allowances Worksheet.
Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on exemptions
and any special allowances that apply.
Deductions and Adjustments Worksheet.
Use this worksheet if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income
on your 2009 tax return and you want to reduce your withholding. Also, complete this worksheet when you have changes to these
items to see if you need to change your withholding.
The Deductions and Adjustments Worksheet is on page 2 of Form W-4. Chapter 1 of Publication 505 explains this worksheet.
Two-Earners/Multiple Jobs Worksheet.
You may need to complete this worksheet if you have more than one job or a working spouse. You also can add to the
amount, if any, on line 8 of this worksheet any additional withholding necessary to cover any amount you expect to owe other
than income tax, such as self-employment tax.
Getting the Right Amount of Tax Withheld
In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these
But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the
right amount withheld. This is most likely to happen in the following situations.
You are married and both you and your spouse work.
You have more than one job at a time.
You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income.
You will owe additional amounts with your return, such as self-employment tax.
Your withholding is based on obsolete Form W-4 information for a substantial part of the year.
Your earnings are more than $130,000 if you are single or $180,000 if you are married.
You work only part of the year.
You change the number of your withholding allowances during the year.
Cumulative wage method.
If you change the number of your withholding allowances during the year, too much or too little tax may have been
withheld for the period before you made the change. You may be able to compensate for this if your employer agrees to use
the cumulative wage withholding method for the rest of the year. You must ask your employer in writing to use this method.
To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc.) since the beginning
of the year.
To make sure you are getting the right amount of tax withheld, get Publication 919. It will help you compare the total tax
to be withheld during the year with the tax you can expect to figure on your return. It also will help you determine how much
additional withholding, if any, is needed each payday to avoid owing tax when you file your return. If you do not have enough
tax withheld, you may have to pay estimated tax, as explained under
Rules Your Employer Must Follow
It may be helpful for you to know some of the withholding rules your employer must follow. These rules can affect how to fill
out your Form W-4 and how to handle problems that may arise.
New Form W-4.
When you start a new job, your employer should give you a Form W-4 to fill out. Beginning with your first payday,
your employer will use the information you give on the form to figure your withholding.
If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. The deadline for putting
it into effect is the start of the first payroll period ending 30 or more days after you turn it in.
No Form W-4.
If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you
were single and claimed no withholding allowances.
Repaying withheld tax.
If you find you are having too much tax withheld because you did not claim all the withholding allowances you are
entitled to, you should give your employer a new Form W-4. Your employer cannot repay any of the tax previously withheld.
Instead, claim the full amount withheld when you file your tax return.
However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you
do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Your employer can repay the
amount that was withheld incorrectly. If you are not repaid, your Form W-2 will reflect the full amount actually withheld.
Exemption From Withholding
If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. The exemption
applies only to income tax, not to social security or Medicare tax.
You can claim exemption from withholding for 2009 only if both of the following situations apply.
For 2008 you had a right to a refund of all federal income tax withheld because you had no tax liability.
For 2009 you expect a refund of all federal income tax withheld because you expect to have no tax liability.
If you are a student, you are not automatically exempt. See chapter 1
to see whether you must file a return. If you work only part time or only during the summer, you may qualify for exemption
Age 65 or older or blind.
If you are 65 or older or blind, use one of the worksheets in chapter 1 of Publication 505, under Exemption From Withholding,
to help you decide whether you can claim exemption from withholding. Do not use either worksheet if you will itemize deductions,
claim exemptions for dependents, or claim tax credits on your 2009 return. Instead, see Itemizing deductions or claiming exemptions or credits
in chapter 1 of Publication 505.
Claiming exemption from withholding.
To claim exemption, you must give your employer a Form W-4. Do not complete lines 5 and 6. Enter “Exempt
” on line 7.
If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must
file a new Form W-4 within 10 days after the change. If you claim exemption in 2009, but you expect to owe income tax for
2010, you must file a new Form W-4 by December 1, 2009.
Your claim of exempt status may be reviewed by the IRS.
An exemption is good for only 1 year.
You must give your employer a new Form W-4 by February 15 each year to continue your exemption.
Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances
under certain plans. The payer can figure withholding on supplemental wages using the same method used for your regular wages.
However, if these payments are identified separately from your regular wages, your employer or other payer of supplemental
wages can withhold income tax from these wages at a flat rate.
Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental
Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses
are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time.
For more information about accountable and nonaccountable expense allowance plans, see
in chapter 26.
You may have to pay a penalty of $500 if both of the following apply.
You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld.
You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4.
There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully
failing to supply information that would increase the amount withheld. The penalty upon conviction can be either a fine of
up to $1,000 or imprisonment for up to 1 year, or both.
These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the
proper withholding of taxes. A simple error or an honest mistake will not result in one of these penalties. For example, a
person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is
six, will not be charged a W-4 penalty.
The tips you receive while working on your job are considered part of your pay. You must include your tips on your tax return
on the same line as your regular pay. However, tax is not withheld directly from tip income, as it is from your regular pay.
Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular
See chapter 6 for information on reporting your tips to your employer. For more information on the withholding rules for tip income, see
Publication 531, Reporting Tip Income.
How employer figures amount to withhold.
The tips you report to your employer are counted as part of your income for the month you report them. Your employer
can figure your withholding in either of two ways.
Not enough pay to cover taxes.
If your regular pay is not enough for your employer to withhold all the tax (including income tax, social security
tax, Medicare tax, or railroad retirement tax) due on your pay plus your tips, you can give your employer money to cover the
Giving your employer money for taxes
in chapter 6.
Your employer should not withhold income tax, social security tax, Medicare tax, or railroad retirement tax on any
allocated tips. Withholding is based only on your pay plus your reported tips. Your employer should refund to you any incorrectly
withheld tax. See
in chapter 6 for more information.
The value of certain noncash fringe benefits you receive from your employer is considered part of your pay. Your employer
generally must withhold income tax on these benefits from your regular pay.
For information on fringe benefits, see
under Employee Compensation in chapter 5.
Although the value of your personal use of an employer-provided car, truck, or other highway motor vehicle is taxable, your
employer can choose not to withhold income tax on that amount. Your employer must notify you if this choice is made.
For more information on withholding on taxable fringe benefits, see chapter 1 of Publication 505.
Sick pay is a payment to you to replace your regular wages while you are temporarily absent from work due to sickness or personal
injury. To qualify as sick pay, it must be paid under a plan to which your employer is a party.
If you receive sick pay from your employer or an agent of your employer, income tax must be withheld. An agent who does not
pay regular wages to you may choose to withhold income tax at a flat rate.
However, if you receive sick pay from a third party who is not acting as an agent of your employer, income tax will be withheld
only if you choose to have it withheld. See
If you receive payments under a plan in which your employer does not participate (such as an accident or health plan where
you paid all the premiums), the payments are not sick pay and usually are not taxable.
If you receive sick pay under a collective bargaining agreement between your union and your employer, the agreement
may determine the amount of income tax withholding. See your union representative or your employer for more information.
If you choose to have income tax withheld from sick pay paid by a third party, such as an insurance company, you must
fill out Form W-4S. Its instructions contain a worksheet you can use to figure the amount you want withheld. They also explain
restrictions that may apply.
Give the completed form to the payer of your sick pay. The payer must withhold according to your directions on the
If you do not request withholding on Form W-4S, or if you do not have enough tax withheld, you may have to make estimated
tax payments. If you do not pay enough tax, either through estimated tax or withholding, or a combination of both, you may
have to pay a penalty. See
at the end of this chapter.
Income tax usually will be withheld from your pension or annuity distributions unless you choose not to have it withheld.
This rule applies to distributions from:
A traditional individual retirement arrangement (IRA),
A life insurance company under an endowment, annuity, or life insurance contract,
A pension, annuity, or profit-sharing plan,
A stock bonus plan, and
Any other plan that defers the time you receive compensation.
The amount withheld depends on whether you receive payments spread out over more than 1 year (periodic payments), within 1
year (nonperiodic payments), or as an eligible rollover distribution (ERD). You cannot choose not to have income tax withheld
from an ERD.
For more information on taxation of annuities and distributions (including ERDs) from qualified retirement plans, see chapter 10
. For information on IRAs, see chapter 17
. For more information on withholding on pensions and annuities, including a discussion of Form W-4P, see Pensions and Annuities
in chapter 1 of Publication 505.
Income tax is withheld at a flat 25% rate from certain kinds of gambling winnings.
Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding.
Any sweepstakes; wagering pool, including payments made to winners of poker tournaments; or lottery.
Any other wager, if the proceeds are at least 300 times the amount of the bet.
It does not matter whether your winnings are paid in cash, in property, or as an annuity. Winnings not paid in cash are taken
into account at their fair market value.
Gambling winnings from bingo, keno, and slot machines generally are not subject to income tax withholding. However,
you may need to provide the payer with a social security number to avoid withholding. See Backup withholding on gambling winnings
in chapter 1 of Publication 505. If you receive gambling winnings not subject to withholding, you may need to pay estimated
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a
If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings,
showing the amount you won and the amount withheld. Report the tax withheld on line 62 of Form 1040.
You can choose to have income tax withheld from unemployment compensation. To make this choice, you will have to fill out
Form W-4V (or a similar form provided by the payer) and give it to the payer.
Unemployment compensation is taxable. So, if you do not have income tax withheld, you may have to pay estimated tax. See
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a
later, for information.
You can choose to have income tax withheld from certain federal payments you receive. These payments are:
Social security benefits,
Tier 1 railroad retirement benefits,
Commodity credit loans you choose to include in your gross income, and
Payments under the Agricultural Act of 1949 (7 U.S.C. 1421 et. seq.), or title II of the Disaster Assistance Act of 1988,
as amended, that are treated as insurance proceeds and that you receive because:
Your crops were destroyed or damaged by drought, flood, or any other natural disaster, or
You were unable to plant crops because of a natural disaster described in (a).
To make this choice, you will have to fill out Form W-4V (or a similar form provided by the payer) and give it to the payer.
If you do not choose to have income tax withheld, you may have to pay estimated tax. See
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a
at the end of this chapter, for information.
For more information about the tax treatment of social security and railroad retirement benefits, see chapter 11
. Get Publication 225, Farmer's Tax Guide, for information about the tax treatment of commodity credit loans or crop disaster
Banks or other businesses that pay you certain kinds of income must file an information return (Form 1099) with the IRS. The
information return shows how much you were paid during the year. It also includes your name and taxpayer identification number
(TIN). TINs are explained in chapter 1 under
Social Security Number
These payments generally are not subject to withholding. However, “backup” withholding is required in certain situations. Backup withholding can apply to most kinds of payments that are reported
on Form 1099.
The payer must withhold at a flat 28% rate in the following situations.
You do not give the payer your TIN in the required manner.
The IRS notifies the payer that the TIN you gave is incorrect.
You are required, but fail, to certify that you are not subject to backup withholding.
The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends
on your income tax return. The IRS will do this only after it has mailed you four notices over at least a 210-day period.
See Backup Withholding in chapter 1 of Publication 505 for more information.
There are civil and criminal penalties for giving false information to avoid backup withholding. The civil penalty
is $500. The criminal penalty, upon conviction, is a fine of up to $1,000 or imprisonment of up to 1 year, or both.
Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment,
interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated
tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your
tax return. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have
to pay a penalty. If you do not pay enough by the due date of each payment period (see
When To Pay Estimated Tax,
later), you may be charged a penalty even if you are due a refund when you file your tax return. For information on when the
penalty applies, see
at the end of this chapter.
Who Does Not Have To Pay Estimated Tax
If you receive salaries or wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of
your earnings. To do this, give a new Form W-4 to your employer. See chapter 1 of Publication 505.
Estimated tax not required.
You do not have to pay estimated tax for 2009 if you meet all three of the following conditions.
You had no tax liability for 2008.
You were a U.S. citizen or resident for the whole year.
Your 2008 tax year covered a 12-month period.
You had no tax liability for 2008 if your total tax was zero or you did not have to file an income tax return.
Who Must Pay Estimated Tax
If you had a tax liability for 2008, you may have to pay estimated tax for 2009.
You must pay estimated tax for 2009 if both of the following apply.
You expect to owe at least $1,000 in tax for 2009, after subtracting your withholding and credits.
You expect your withholding and credits to be less than the smaller of:
90% of the tax to be shown on your 2009 tax return, or
100% of the tax shown on your 2008 tax return. Your 2008 tax return must cover all 12 months.
Special rules for farmers, fishermen, and higher income taxpayers.
There are exceptions to the general rule for farmers, fishermen, and certain higher income taxpayers. See Figure 4-A
and chapter 2 of Publication 505 for more information.
Resident and nonresident aliens also may have to pay estimated tax. Resident aliens should follow the rules in this chapter
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 alien if you either
have a green card or meet the substantial presence test. For more information about the substantial presence test, see Publication
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.
However, you and your spouse cannot make joint estimated tax payments if:
You are legally separated under a decree of divorce or separate maintenance,
You and your spouse have different tax years, or
Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien (see chapter 1 of Publication
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 2009.
2008 separate returns and 2009 joint return.
If you plan to file a joint return with your spouse for 2009, but you filed separate returns for 2008, your 2008 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.
2008 joint return and 2009 separate returns.
If you plan to file a separate return for 2009, but you filed a joint return for 2008, your 2008 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 the joint return, first figure the tax both you and your spouse would have paid
had you filed separate returns for 2008 using the same filing status as for 2009. 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
Joe and Heather filed a joint return for 2008 showing taxable income of $48,500 and a tax of $6,476. Of the $48,500 taxable
income, $40,100 was Joe's and the rest was Heather's. For 2009, they plan to file married filing separately. Joe figures his
share of the tax on the 2008 joint return as follows.
||Tax on $40,100 based on a separate return
||Tax on $8,400 based on a separate return
||Joe's percentage of total ($6,375 ÷ $7,238)
||Joe's share of tax on joint return
($6,476 × 88%)
How To Figure Estimated Tax
To figure your estimated tax, you must figure your expected adjusted gross income (AGI), tax-able income, taxes, deductions,
and credits for the year.
When figuring your 2009 estimated tax, it may be helpful to use your income, deductions, and credits for 2008 as a starting
point. Use your 2008 federal tax return as a guide. You can use Form 1040-ES to figure your estimated tax. Nonresident aliens
use Form 1040-ES (NR) to figure estimated tax.
You must make adjustments both for changes in your own situation and for recent changes in the tax law. For 2009, there are
several changes in the law. For a discussion of these changes, see Publication 553, Highlights of 2008 Tax Changes, or visit
the IRS website at www.irs.gov.
Form 1040-ES includes a worksheet to help you figure your estimated tax. Keep the worksheet for your records.
For more complete information and examples of how to figure your estimated tax for 2009, see chapter 2 of Publication 505.
When To Pay Estimated Tax
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If
you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due
a refund when you file your income tax return. The following chart gives the payment periods and due dates for estimated tax
||For the period:
||Jan. 1* – March 31
||April 1 – May 31
||June 1 – August 31
||Sept. 1– Dec. 31
||January 15 next year**
||*If your tax year does not begin on January 1,
see the Form 1040-ES instructions.
Saturday, Sunday, holiday rule.
If the due date for 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.
If you file your 2009 Form 1040 or Form 1040A by February 1, 2010, and pay the rest of the tax you owe, you do not
need to make the payment due on January 15, 2010.
Fiscal year taxpayers.
If your tax year does not start on January 1, see the Form 1040-ES instructions for your payment due dates.
You do not have to make estimated tax payments until you have income on which you will owe the tax. If you have income subject
to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period.
You can pay all your estimated tax at that time, or you can pay it in installments. If you choose to pay in installments,
make your first payment by the due date for the first payment period. Make your remaining installment payments by the due
dates for the later periods.
No income subject to estimated tax during first period.
If you do not have income subject to estimated tax until a later payment period, you must make your first payment by the due
date for that period. You can pay your entire estimated tax by the due date for that period or you can pay it in installments
by the due date for that period and the due dates for the remaining periods. The following chart shows when to make installment
|If you first have income on which you must pay estimated tax:
|Before April 1
Jan. 15 next year
|April 1–May 31
Jan. 15 next year
|June 1–Aug. 31
||Jan. 15 next year
|After Aug. 31
How To Figure Each Payment
You should pay enough estimated tax by the due date of each payment period to avoid a penalty for that period. You can figure
your required payment for each period by using either the regular installment method or the annualized income installment
method. These methods are described in chapter 2 of Publication 505. If you do not pay enough each payment period, you may
be charged a penalty even if you are due a refund when you file your tax return.
Under the regular method, if your estimated tax payment for any period is less than one-fourth of your estimated tax,
you may be charged a penalty for underpayment of estimated tax for that period when you file your tax return. See chapter
4 of Publication 505 for more information.
Change in estimated tax.
After you make an estimated tax payment, changes in your income, adjustments, deductions, credits, or exemptions may
make it necessary for you to refigure your estimated tax. Pay the unpaid balance of your amended estimated tax by the next
payment due date after the change or in installments by that date and the due dates for the remaining payment periods.
Estimated Tax Payments Not Required
You do not have to pay estimated tax if your withholding in each payment period is at least as much as:
One-fourth of your required annual payment, or
Your required annualized income installment for that period.
You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you owe with your
return under $1,000.
There are five ways to pay estimated tax.
Credit an overpayment on your 2008 return to your 2009 estimated tax.
Send in your payment (check or money order) with a payment voucher from Form 1040-ES.
Pay electronically using the Electronic Federal Tax Payment System (EFTPS).
Pay by electronic funds withdrawal if you are filing Form 1040 or Form 1040A electronically.
Pay by credit card using a pay-by-phone system or the Internet.
If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2008, you can apply part or all of it
to your estimated tax for 2009. On line 74 of Form 1040, or line 46 of Form 1040A, enter 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
The credit will be applied to your payments in the order necessary to avoid the penalty for underpayment of estimated tax.
You cannot have any of that amount refunded to you until the close of that tax year. You also cannot use that overpayment
in any other way.
Pay by Check or Money Order Using the Estimated Tax Payment Voucher
Each payment of estimated tax by check or money order must be accompanied by a payment voucher from Form 1040-ES. If you made
estimated tax payments last year and did not use a paid preparer to file your return, you should receive a copy of the 2009
Form 1040-ES in the mail. It will contain 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.
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.
If you did not pay estimated tax last year, you will have to get Form 1040-ES (see inside back cover of this publication).
Follow the instructions in the package to make sure you use the vouchers correctly.
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, 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. Send
a clear and concise written statement to the Internal Revenue Service Center where you filed your last return and provide
all of the following.
Your full name (and spouse's full name).
Your signature (and spouse's signature).
Your old address (and spouse's old address if different).
Your new address.
Your social security number (and spouse's social security number).
You can use Form 8822, Change of Address, for this purpose.
If you want to make estimated payments by using EFTPS, by electronic funds withdrawal, or by credit card, see the Form 1040-ES
instructions or How To Pay Estimated Tax in chapter 2 of Publication 505.
Credit for Withholding and Estimated Tax
When you file your 2008 income tax return, take credit for all the income tax and excess social security or railroad retirement
tax withheld from your salary, wages, pensions, etc. Also, take credit for the estimated tax you paid for 2008. These credits
are subtracted from your tax. You should file a return and claim these credits, even if you do not owe tax.
Two or more employers.
If you had two or more employers and were paid wages of more than $102,000 during 2008, too much social security or
tier 1 railroad retirement tax may have been withheld from your wages. You may be able to claim the excess as a credit against
your income tax when you file your return. See
Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld
in chapter 37.
If you had income tax withheld during 2008, you should be sent a statement by February 2, 2009, showing your income and the
tax withheld. Depending on the source of your income, you will receive:
Form W-2, Wage and Tax Statement,
Form W-2G, Certain Gambling Winnings, or
A form in the 1099 series.
Forms W-2 and W-2G.
Always file Form W-2 with your income tax return. File Form W-2G with your return only if it shows any federal income
tax withheld from your winnings.
You should get at least two copies of each form you receive. Attach one copy to the front of your federal income tax
return. Keep one copy for your records. You also should receive copies to file with your state and local returns.
Your employer is required to provide or send Form W-2 to you no later than February 2, 2009. You should receive a separate
Form W-2 from each employer you worked for.
If you stopped working before the end of the year, your employer could have given you your Form W-2 at any time after you
stopped working. However, your employer must provide or send it to you by February 2, 2009.
If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30
days after your final wage payment, whichever is later.
If you have not received your Form W-2 on time, you should ask your employer for it. If you do not receive it by February
15, call the IRS.
Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld
during the year. Include the federal income tax withheld (as shown on Form W-2) on:
Line 62 if you file Form 1040,
Line 38 if you file Form 1040A, or
Line 7 if you file Form 1040EZ.
In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay.
If you had gambling winnings in 2008, the payer may have withheld income tax. If tax was withheld, the payer will give you
a Form W-2G showing the amount you won and the amount of tax withheld.
Report the amounts you won on line 21 of Form 1040. Take credit for the tax withheld on line 62 of Form 1040. If you had gambling
winnings, you must use Form 1040; you cannot use Form 1040A or Form 1040EZ.
Most forms in the 1099 series are not filed with your return. In general, you should be sent these forms by February 2, 2009.
Unless instructed to file any of these forms with your return, keep them for your records. There are several different forms
in this series, including:
Form 1099-B, Proceeds From Broker and Barter Exchange Transactions;
Form 1099-C, Cancellation of Debt;
Form 1099-DIV, Dividends and Distributions;
Form 1099-G, Certain Government Payments;
Form 1099-INT, Interest Income;
Form 1099-MISC, Miscellaneous Income;
Form 1099-OID, Original Issue Discount;
Form 1099-Q, Payments From Qualified Education Programs;
Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.;
Form SSA-1099, Social Security Benefit Statement; and
Form RRB-1099, Payments by the Railroad Retirement Board.
If you received the types of income reported on some forms in the 1099 series, you may not be able to use Form 1040A or Form
1040EZ. See the instructions to these forms for details.
Attach Form 1099-R to your return if box 4 shows federal income tax withheld. Include the amount withheld in the total
on line 62 of Form 1040 or line 38 of Form 1040A. You cannot use Form 1040EZ if you received payments reported on Form 1099-R.
If you were subject to backup withholding on income you received during 2008, include the amount withheld, as shown
in box 4 of your Form 1099, in the total on line 62 of Form 1040, line 38 of Form 1040A, or line 7 of Form 1040EZ.
If you receive a form with incorrect information on it, you should ask the payer for a corrected form. Call the telephone
number or write to the address given for the payer on the form. The corrected Form W-2G or Form 1099 you receive will have
an “X” in the “CORRECTED” box at the top of the form. A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a Form W-2.
Form Received After Filing
If you file your return and you later receive a form for income that you did not include on your return, you should report
the income and take credit for any income tax withheld by filing Form 1040X, Amended U.S. Individual Income Tax Return.
If you are married but file a separate return, you can take credit only for the tax withheld from your own income. Do not
include any amount withheld from your spouse's income. However, different rules may apply if you live in a community property
Community property states are listed in chapter 2. For more information on these rules, and some exceptions, see Publication
555, Community Property.
If you file your tax return on the basis of a fiscal year (a 12-month period ending on the last day of any month except December),
you must follow special rules to determine your credit for federal income tax withholding. For a discussion of how to take
credit for withholding on a fiscal year return, see Fiscal Years (FY) in chapter 3 of Publication 505.
Take credit for all your estimated tax payments for 2008 on line 63 of Form 1040 or line 39 of Form 1040A. Include any overpayment
from 2007 that you had credited to your 2008 estimated tax. You must use Form 1040 or Form 1040A if you paid estimated tax.
You cannot use Form 1040EZ.
If you changed your name, and you made estimated tax payments using your old name, attach a brief statement to the
front of your tax return indicating:
When you made the payments,
The amount of each payment,
The IRS address to which you sent the payments,
Your name when you made the payments, and
Your social security number.
The statement should cover payments you made jointly with your spouse as well as any you made separately.
If you and your spouse made separate estimated tax payments for 2008 and you file separate returns, you can take credit only
for your own payments.
If you made joint estimated tax payments, you must decide how to divide the payments between your returns. One of you can
claim all of the estimated tax paid and the other none, or you can divide it in any other way you agree on. If you cannot
agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2008.
If you made joint estimated tax payments for 2008, and you were divorced during the year, either you or your former spouse
can claim all of the joint payments, or you each can claim part of them. If you cannot agree on how to divide the payments,
you must divide them in proportion to each spouse's individual tax as shown on your separate returns for 2008.
If you claim any of the joint payments on your tax return, enter your former spouse's social security number (SSN) in the
space provided on the front of Form 1040 or Form 1040A. If you divorced and remarried in 2008, enter your present spouse's
SSN in that space and write your former spouse's SSN, followed by “DIV,” to the left of Form 1040, line 63, or Form 1040A, line 39.
If you did not pay enough tax, either through withholding or by making estimated tax payments, you will have an underpayment
of estimated tax and you may have to pay a penalty.
Generally, you will not have to pay a penalty for 2008 if any of the following situations applies.
The total of your withholding and estimated tax payments was at least as much as your 2007 tax (or 110% of your 2007 tax if
your AGI was more than $150,000, $75,000 if your 2008 filing status is married filing separately) and you paid all required
estimated tax payments on time.
The tax balance due on your return is no more than 10% of your total 2008 tax, and you paid all required estimated tax payments
Your total 2008 tax minus your withholding is less than $1,000.
You did not have a tax liability for 2007.
You did not have any withholding taxes and your current year tax less any household employment taxes is less than $1,000.
Special rules apply if you are a farmer or fisherman. See Farmers and Fishermen in chapter 4 of Publication 505 for more information.
IRS can figure the penalty for you.
If you think you owe the penalty but you do not want to figure it yourself when you file your tax return, you may not have
to. Generally, the IRS will figure the penalty for you and send you a bill. However, if you think you are able to lower or
eliminate your penalty, you must complete Form 2210 or Form 2210-F and attach it to your return. See chapter 4 of Publication
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