Table of Contents
- What's New for 2008
- Introduction
- Topics - This chapter discusses:
- Useful Items - You may want to see:
- Who Does Not Have To Pay Estimated Tax
- Who Must Pay Estimated Tax
- How To Figure Estimated Tax
- When To Pay Estimated Tax
- How To Figure Each Payment
- How To Pay Estimated Tax
- Illustrated Examples
- 2008 Standard Deduction Tables
This section summarizes important changes that could affect your estimated tax payments for 2008.
Earned income credit (EIC). You may be able to take the EIC if:
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Two or more children lived with you and you earned less than $38,646 ($41,646 if married filing jointly),
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One child lived with you and you earned less than $33,995 ($36,995 if married filing jointly), or
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No children lived with you and you earned less than $12,880 ($15,880 if married filing jointly).
The maximum investment income you can have and still get the credit has increased to $2,950. For more information, see Publication 596, Earned Income Credit (EIC).
Retirement savings plans. . The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Traditional IRA deduction limits increased. You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if age 50 or older at the end of the year). You may be able to take an IRA deduction if you were covered by a retirement plan at work and your 2008 modified adjusted gross income (AGI) is less than $63,000 ($105,000 if married filing jointly or a qualifying widow(er)). Retirement savings contributions credit (saver's credit). For 2008, the income limits have increased and you may be able to claim this credit if your modified AGI is not more than $26,500 ($53,000 if married filing jointly, $39,750 if head of household).
Personal exemption and itemized deduction phaseouts reduced. The amount by which these deductions are reduced in 2008 will be one-half of the reduction that applied in 2007.
Standard mileage rates. Beginning in 2008, the standard mileage rate for the cost of operating your car is:
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50½ cents a mile for all business miles driven,
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19 cents a mile for the use of your car for medical reasons,
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19 cents a mile for the use of your car for a deductible move, and
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14 cents a mile for the use of your car for charitable reasons.
Tax on child's investment income. . Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800.
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Children under age 18 at the end of 2008.
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The following children if their earned income is not more than half their support.
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Children age 18 at the end of 2008.
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Children over age 18 and under age 24 at the end of 2008 who are full-time students.
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The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251, Alternative Minimum Tax—Individuals, also will apply to the children listed above.
Forgiveness of mortgage debt. . You may be able to exclude from income part or all of the mortgage debt forgiven on your principal residence. This applies for debt forgiven in 2007 through 2009. See Publication 553, Highlights of 2007 Tax Changes, for more details.
Volunteer firefighters and emergency medical responders. . Certain qualified payments and other State and local tax benefits are not included in taxable income. For more information, see Publication 553.
Special rule for sales of principal residences by surviving spouses. . A surviving spouse who sells his or her principal residence within 2 years after the spouse's date of death may be allowed to exclude up to $500,000 of qualified gain instead of $250,000. See Publication 553 for more information.
Capital gain tax rate reduced. . The 5% capital gain tax rate is reduced to zero.
Extended tax benefits. . The deduction for qualified mortgage insurance premiums was extended through 2010.
Expiring tax benefits. Legislation during 2008 may extend one or more of the following benefits. For the latest information, see Highlights of Recent Tax Changes, at www.irs.gov. The following tax benefits are scheduled to expire at the end of 2007 and will not apply for 2008.
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Deduction for educator expenses in figuring AGI.
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Tuition and fees deduction.
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The exclusion from income of qualified charitable distributions.
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Credit for nonbusiness energy property.
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District of Columbia first-time homebuyer credit (for homes purchased after 2007).
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Deduction for state and local general sales tax.
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The election to include nontaxable combat pay in earned income for the EIC.
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Penalty-free withdrawals from retirement plans for individuals called to active duty.
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Tax credit for research and experimentation expenses.
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Indian employment tax credit.
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Credit for energy efficient appliances.
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 on page 23), 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 chapter 4.
It would be helpful for you to keep a copy of your 2007 tax return and an estimate of your 2008 income nearby while reading this chapter.
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Who must pay estimated tax,
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How to figure estimated tax (including illustrated examples),
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When to pay estimated tax,
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How to figure each payment, and
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How to pay estimated tax.
Publication
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553 Highlights of 2007 Tax Changes
Form (and Instructions)
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1040-ES
Estimated Tax for Individuals
See chapter 5 for information about how to get this publication and form.
If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer. See chapter 1.
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You had no tax liability for 2007.
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You were a U.S. citizen or resident alien for the whole year.
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Your 2007 tax year covered a 12-month period.
If you owed additional tax for 2007, you may have to pay estimated tax for 2008.
You must pay estimated tax for 2008 if both of the following apply.
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You expect to owe at least $1,000 in tax for 2008, after subtracting your withholding and credits.
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You expect your withholding and credits to be less than the smaller of:
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90% of the tax to be shown on your 2008 tax return, or
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100% of the tax shown on your 2007 tax return. Your 2007 tax return must cover all 12 months.
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Note. These percentages may be different if you are a farmer, fisherman, or higher income taxpayer. See Special Rules on the next page.
You may find Figure 2-A below helpful in determining if you must pay estimated tax.
If all your income will be subject to income tax withholding, you probably do not need to pay estimated tax.
Example 1.
To figure whether she should pay estimated tax for 2008, Jane, who files as head of household, uses Figure 2-A and the following information.
Expected AGI for 2008 | $79,800 |
AGI for 2007 | $73,700 |
Tax shown on 2007 return | $ 9,944 |
Tax expected to be shown on 2008 return | $11,263 |
Tax expected to be withheld in 2008 | $10,200 |
Jane's answer to the chart's first question is YES; she expects to owe at least $1,000 for 2008 after subtracting her withholding from her expected tax ($11,263 - $10,200 = $1,063). Her answer to the chart's second question is also YES; she expects her income tax withholding ($10,200) to be at least 90% of the tax to be shown on her 2008 return ($11,263 × 90% = $10,137). Jane does not need to pay estimated tax.
Example 2.
The facts are the same as in Example 1, except that Jane expects only $8,500 tax to be withheld in 2008. Because that is less than $10,137, 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 2007 return ($9,944). Jane must pay estimated tax for 2008.
Example 3.
The facts are the same as in Example 2, except that the tax shown on Jane's 2007 return was $8,000. Because she expects to have more than $8,000 withheld in 2008 ($8,500), her answer to the chart's third question is YES. Jane does not need to pay estimated tax for 2008.
If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income.
You and your spouse can qualify to make joint estimated tax payments even if you are not living together.
However, you and your spouse cannot make joint estimated tax payments if:
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You are legally separated under a decree of divorce or separate maintenance,
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You and your spouse have different tax years, or
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Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien). See Choosing Resident Alien Status in Publication 519.
If you do not qualify to make joint estimated tax payments, apply these rules to your separate estimated income.
Making joint or separate estimated tax payments will not affect your choice of filing a joint tax return or separate returns for 2008.
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 |
Example.
Joe and Heather filed a joint return for 2007 showing taxable income of $48,500 and a tax of $6,496. Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. For 2008, they plan to file married filing separately. Joe figures his share of the tax on the 2007 joint return as follows:
Tax on $40,100 based on separate return | $6,455 | ||
Tax on $8,400 based on separate return | 873 | ||
Total | $7,328 | ||
Joe's percentage of total ($6,455 ÷ $7,328) | 88% | ||
Joe's share of tax on joint return
($6,496 × 88%) |
$5,716 |
There are special rules for farmers, fishermen, and certain higher income taxpayers.
If at least two-thirds of your gross income for 2007 or 2008 is from farming or fishing, substitute 66⅔% for 90% in (2a) under General Rule on the previous page.
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Income from operating a stock, dairy, poultry, bee, fruit, or truck farm.
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Income from a plantation, ranch, nursery, range, orchard, or oyster bed.
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Crop shares for the use of your land.
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Gains from sales of draft, breeding, dairy, or sporting livestock.
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Schedule F (Form 1040), Profit or Loss From Farming, line 11;
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Form 4835, Farm Rental Income and Expenses, line 7;
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Your share of the gross income from farming of a partnership, S corporation, estate or trust, from Schedule K-1 (Form 1065), Box 14, code B; Schedule K-1 (Form 1120S), Box 17, code T; or Schedule K-1 (Form 1041), Box 14, code F; and
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Your gains from sales of draft, breeding, dairy, or sporting livestock shown on Form 4797, Sales of Business Property.
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Schedule C (Form 1040), Profit or Loss From Business, line 7.
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Income for services as an officer or crew member of a vessel while the vessel is engaged in fishing.
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Your share of the gross income from fishing of a partnership, S corporation, estate or trust, from Schedule K-1 (Form 1065), Box 14, code B; Schedule K-1 (Form 1120S), Box 17, code T; or Schedule K-1 (Form 1041), Box 14, code F.
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Income for services normally performed in connection with fishing.
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Shore service as an officer or crew member of a vessel engaged in fishing, and
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Services that are necessary for the immediate preservation of the catch, such as cleaning, icing, and packing the catch.
If your AGI for 2007 was more than $150,000 ($75,000 if your filing status for 2008 is married filing a separate return), substitute 110% for 100% in (2b) under General Rule on page 19.
For 2007, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.
Note.
This rule does not apply to farmers and fishermen.
Resident and nonresident aliens also may 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 alien if you either have a green card or meet the substantial presence test.
See Publication 519 for more information about Form 1040-ES (NR) and withholding (chapter 8) and the substantial presence test (chapter 1).
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.
To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year.
When figuring your 2008 estimated tax, it may be helpful to use your income, deductions, and credits for 2007 as a starting point. Use your 2007 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 2008, there are several changes in the law. Some of these changes are discussed under What's New for 2008 at the beginning of this chapter. For information about these and other changes in the law, get Publication 553 or visit the IRS website at www.irs.gov.
The instructions for Form 1040-ES include a worksheet to help you figure your estimated tax. Keep the worksheet for your records.
Use the worksheet (Figure 2-B) above to help guide you through the information about completing the 2008 Estimated Tax Worksheet. You also will find a blank worksheet on page 33.
Your expected AGI for 2008 (line 1) is your expected total income minus your expected adjustments to income.
Social security and railroad retirement benefits. If you expect to receive social security or tier 1 railroad retirement benefits during 2008, use Worksheet 2-1 on page 34 to figure the amount of expected taxable benefits you should include on line 1.
Self-employed. If you expect to have income from self-employment, use Worksheet 2-2 on page 34 to figure your expected self-employment tax and your deduction for one-half of your self-employment tax. Include the amount from line 10 of Worksheet 2-2 in your expected adjustments to income. If you file a joint return and both you and your spouse have net earnings from self-employment, each of you must complete a separate worksheet.
Reduce your expected AGI for 2008 (line 1) by either your expected itemized deductions or your standard deduction and by your exemptions (lines 2 through 5).
Phaseout of itemized deductions. For 2008, your total itemized deductions may be reduced if your AGI is more than $159,950 ($79,975 if married filing separately). If you expect your AGI to be more than that amount, use Worksheet 2-3 on page 35 to figure the amount to enter on line 2.
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File a separate return and your spouse itemizes deductions,
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Are a dual-status alien, or
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File a return for a period of less than 12 months because you change your accounting period.
Reduction of personal exemption amount. For 2008, your deduction for personal exemptions is reduced if your AGI is larger than the AGI shown below for your filing status.
Single | $159,950 |
Married filing jointly or qualifying widow(er) | $239,950 |
Married filing separately | $119,975 |
Head of household | $199,950 |
If you expect your AGI to be more than that amount, use Worksheet 2-4 on page 35 to figure the amount to enter on line 4.
After you have figured your expected taxable income (line 5), follow the steps below to figure your expected taxes, credits, and total tax for 2008. Most people will have entries for only a few of these steps. However, you should check every step to be sure you do not overlook anything.
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Children under age 18 at the end of 2008.
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The following children if their earned income is not more than half their support.
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Children age 18 at the end of 2008.
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Children over age 18 and under age 24 at the end of 2008 who are full-time students.
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Tax on capital gain and qualified dividends. If you expect to have a net capital gain or qualified dividends, use Worksheet 2-5 on page 36 to figure your tax.
Tax if excluding foreign earned income or housing. If you expect to claim the foreign earned income exclusion or the housing exclusion on Form 2555 or Form 2555-EZ, use Worksheet 2-6 on page 37 to figure your estimated tax.
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Your tax on line 6;
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Your expected alternative minimum tax (AMT) from Form 6251 (or included on Form 1040A, line 28) on line 7;
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Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions (line 44, boxes a and b, of the 2007 Form 1040); and
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Any recapture of education credits.
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Taxes on early distributions from:
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An IRA or other qualified plan,
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An annuity, or
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A modified endowment contract entered into after June 20, 1988;
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Advance earned income credit payments;
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Household employment taxes (before subtracting advance EIC payments made to your employee(s)) if:
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You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income, or
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You would be required to make estimated tax payments even if you did not include household employment taxes when figuring your estimated tax; and
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Amounts written in on Form 1040, line 63. But, do not include tax on recapture of a federal mortgage subsidy, tax on golden parachute payments, excise tax on insider stock compensation from an expatriated corporation, or uncollected employee social security, Medicare, or RRTA tax on tips or group-term life insurance.
On lines 14a through 14c, figure the total amount you must pay for 2008, through withholding and estimated tax payments, to avoid paying a penalty.
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90% of your total expected tax for 2008, or
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100% of the total tax shown on your 2007 return. Your 2007 tax return must cover all 12 months.
For 2007, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.
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66⅔% (.6667) of your total tax for 2008, or
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100% of the total tax shown on your 2007 return. (Your 2007 tax return must cover all 12 months.)
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The amounts on lines 59, 66a, 68, and 71.
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The following amounts included on line 60.
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Any tax on excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts.
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Any tax on excess accumulations in qualified retirement plans from Form 5329.
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The following amounts included on line 63.
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Any recapture of a federal mortgage subsidy.
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Any tax on golden parachute payments.
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Excise tax on insider stock compensation from an expatriated corporation.
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Any uncollected employee social security, Medicare, or railroad retirement tax on tips or group-term life insurance.
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Any credit from Form 4136 or Form 8885 included on line 70.
Use lines 15 and 16a to figure the total estimated tax you must pay for 2008. Subtract your expected withholding from your required annual payment. You usually must pay this difference in four equal installments. (See When To Pay Estimated Tax on this page and How To Figure Each Payment on page 24.)
You do not have to pay estimated tax if:
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Line 14c minus line 15 is zero or less, or
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Line 13c minus line 15 is less than $1,000.
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 payment periods and due dates for estimated tax payments are shown next.
For the period: | Due date: | |
Jan. 1 1 - March 31 | April 15 | |
April 1 - May 31 | June 15 | |
June 1 - August 31 | September 15 | |
Sept. 1 - Dec. 31 |
January 15
next year 2 |
1If your tax year does not begin on January 1,
see Fiscal year taxpayers below. |
2See January payment below. |
Example.
Janet Adams does not pay any estimated tax for 2008. She files her 2008 income tax return and pays the balance due shown on her return on January 26, 2009.
Janet's estimated tax for the fourth payment period is considered to have been paid on time. However, she may owe a penalty for not making the first three estimated tax payments. Any penalty for not making those payments will be figured up to January 26, 2009.
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The 15th day of the 4th month of your fiscal year,
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The 15th day of the 6th month of your fiscal year,
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The 15th day of the 9th month of your fiscal year, and
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The 15th day of the 1st month after the end of your fiscal year.
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.
Table 2-1. Due Dates for Estimated Tax Installment Payments
If you first have income on which you must pay estimated tax: |
Make a
payment by:* |
Make later
installments by:* |
Before April 1 | April 15 | June 15 |
Sept. 15 | ||
Jan. 15 next year | ||
April 1-May 31 | June 15 | Sept. 15 |
Jan. 15 next year | ||
June 1-Aug. 31 | Sept. 15 | Jan. 15 next year |
After Aug. 31 | Jan. 15 next year | (None) |
*See January payment and Saturday, Sunday, holiday rule on page 23. | |
If at least two-thirds of your gross income for 2007 or 2008 is from farming or fishing, you have only one payment due date for your 2008 estimated tax, January 15, 2009. The due dates for the first three payment periods, discussed under When To Pay Estimated Tax on page 23, do not apply to you.
If you file your 2008 Form 1040 by March 2, 2009, and pay all the tax you owe, you do not need to make an estimated tax payment.
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Pay all your estimated tax by the 15th day after the end of your tax year, or
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File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year.
After you have figured your total estimated tax, figure how much you must pay by the due date of each payment period. You should pay enough by each due date to avoid a penalty for that period. If you do not pay enough during any payment period, you may be charged a penalty even if you are due a refund when you file your tax return. The penalty is discussed in chapter 4.
If your first estimated tax payment is due April 15, 2008, you can figure your required payment for each period by dividing your annual estimated tax due (line 16a of the 2008 Estimated Tax Worksheet) by 4. Enter this amount on line 17. However, use this method only if your income is basically the same throughout the year.
If you do not receive your income evenly throughout the year, your required estimated tax payments may not be the same for each period. See Annualized Income Installment Method below.
Amended estimated tax. If you refigure your estimated tax during the year, or if your first estimated tax payment is due after April 15, 2008, figure your required payment for each remaining payment period using Worksheet 2-7 on page 37.
Example.
Early in 2008, Mira Roberts figures that her estimated tax due is $1,800. She makes estimated tax payments on April 15 and June 15 of $450 each ($1,800 ÷ 4).
On July 10, she sells investment property at a gain. Her refigured estimated tax is $4,100. Her required estimated tax payment for the third payment period is $2,175, as shown in her filled-in Worksheet 2-7 on this page.
If Mira's estimated tax does not change again, her required estimated tax payment for the fourth payment period will be $1,025.
Worksheet 2-7. Amended Estimated Tax Worksheet—Illustrated
1. | Amended total estimated tax due | 1. | $4,100 | |||
2. | Multiply line 1 by: | |||||
50% (.50) if next payment is due June 15, 2008 | ||||||
75% (.75) if next payment is due September 15, 2008 | ||||||
100% (1.00) if next payment is due January 15, 2009 | 2. | 3,075 | ||||
3. | Estimated tax payments for all previous periods | 3. | 900 | |||
4. | Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment | 4. | $2,175 | |||
Note.If the payment on line 4 is due January 15, 2009, stop here. Otherwise, go to line 5. | ||||||
5. | Add lines 3 and 4 | 5. | 3,075 | |||
6. | Subtract line 5 from line 1 and enter the result (but not less than zero) | 6. | 1,025 | |||
7. | Each following required payment: If the payment on line 4 is due June 15, 2008, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 15, 2008, and January 15, 2009. If the amount on line 4 is due September 15, 2008, enter the full amount on line 6 here and on the payment voucher for your payment due January 15, 2009 | 7. | $1,025 |
If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method.
The annualized income installment method 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 from the beginning of the tax year through the end of the period. To see whether you can pay less for any period, complete the 2008 Annualized Estimated Tax Worksheet (Worksheet 2-8) beginning on page 38.
You first must complete the 2008 Estimated Tax Worksheet through line 16b. (See page 33 for blank worksheet.)
Use the result you figure on line 28 of the Annualized Estimated Tax Worksheet to make your estimated tax payments and complete your payment vouchers.
See Example 2, beginning on page 28, to see how the worksheet is completed.
Note.
If you use the annualized income installment method to figure your estimated tax payments, you must file Form 2210 with your 2008 tax return. See Annualized Income Installment Method (Schedule AI) in chapter 4 for more information.
Use Figure 2-C on page 26 to help you follow these instructions. Another worksheet is available for your use on pages 38 and 39.
The purpose of this worksheet is to determine your estimated tax liability as your income accumulates throughout the year, rather than dividing your entire year's estimated tax liability by four as if your income was earned equally throughout the year. The top of the worksheet (see page 26) shows the dates for each payment period. The periods build; that is, each period includes all previous periods. After the end of each payment period, complete the corresponding worksheet column to figure the payment due for that period.
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Children under age 18 at the end of 2008.
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The following children if their earned income is not more than half their support.
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Children age 18 at the end of 2008.
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Children over age 18 and under age 24 at the end of 2008 who are full-time students.
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Tax on capital gain and qualified dividends. If the amount on line 1 includes capital gains or qualified dividends, use Worksheet 2-11 on page 41 to figure the amount to enter on line 12.
Tax if excluding foreign earned income or housing. If you expect to claim the foreign earned income exclusion or the housing exclusion on Form 2555 or Form 2555-EZ, use Worksheet 2-12 on page 42 to figure the amount to enter on line 12.
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Tax on early distributions from qualified plans, including IRAs and other tax favored accounts,
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Advance earned income credit payments,
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Tax from Form 4972,
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Tax from Form 8814,
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Tax from recapture of an education credit,
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Household employment taxes that are reported on your income tax return, and
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Amounts written in on Form 1040, line 63 (but see Exceptions below).
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25% (.25) for the first period,
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50% (.50) for the second period,
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75% (.75) for the third period, and
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100% (1.00) for the fourth period.
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Skip column (a).
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On line 1, enter your income for the period that is effectively connected with a U.S. trade or business.
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On line 17, increase your entry by the amount determined by multiplying your income for the period that is not effectively connected with a U.S. trade or business by the following.
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72% for column (b).
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45% for column (c).
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30% for column (d).
However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2.4, 1.5, and 1, respectively.
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-
On line 22, enter one-half of the amount from line 16c of the Form 1040-ES (NR) 2008 Estimated Tax Worksheet in column (b), and one-fourth in columns (c) and (d).
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On lines 20 and 23, skip column (b).
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On line 27, if you do not use the actual withholding method, include one-half of your total expected withholding in column (b) and one-fourth in columns (c) and (d).
You do not have to pay estimated tax if your withholding in each payment period is at least as much as:
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One-fourth of your required annual payment, or
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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 will owe with your return under $1,000.
There are five ways to pay estimated tax.
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Credit an overpayment on your 2007 return to your 2008 estimated tax.
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Send in your payment (check or money order) with a payment voucher from Form 1040-ES.
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Pay electronically using the Electronic Federal Tax Payment System (EFTPS).
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Pay by electronic funds withdrawal if you are filing Form 1040 or Form 1040A electronically.
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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 2007, you can apply part or all of it to your estimated tax for 2008. On line 75 of Form 1040, or line 45 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 tax payments.
If you are a beneficiary of an estate or trust, and the trustee elects to credit 2008 trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, 2009.
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.
Example.
When Kathleen finished filling out her 2007 tax return, she saw that she had overpaid her taxes by $750. Kathleen knew she would owe additional tax in 2008. She credited $600 of the overpayment to her 2008 estimated tax and had the remaining $150 refunded to her.
In September, she amended her 2007 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 2007 overpayment from $750 to $500. Because the $750 had already been applied to her 2008 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 2008 estimated tax to pay this bill.
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, you should receive a copy of the 2008 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). 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 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.
Note.
If you have preprinted payment vouchers, continue to use them until the IRS sends you new ones. However, do not correct the address on the old voucher.
EFTPS is a free tax payment system designed with all taxpayers in mind. Online or by phone, you input your tax payment information electronically and you are done. EFTPS offers you convenience. Through EFTPS, you can schedule one-time or recurring payments for withdrawal from your checking or savings account up to 365 days in advance. You also can modify or cancel payments up to 2 business days before the scheduled withdrawal date. To use EFTPS, you must enroll. Enroll online at www.eftps.gov or call 1-800-555-4477 (for business accounts) or 1-800-316-6541 (for individual accounts) to receive an enrollment form and instructions by mail. TTY/TDD help is available by calling 1-800-733-4829. Call 1-800-244-4829 for Spanish.
If you electronically file your 2007 tax return, you can make up to four (4) 2008 estimated tax payments by EFW. This is a free option. The payments can be withdrawn from either a checking or savings account. At the same time you file your return, you may schedule estimated tax payments for any or all of the following dates: April 15, 2008, June 16, 2008, September 15, 2008, and January 15, 2009.
Check with your tax return preparer or tax preparation software for details. Your scheduled payments will be acknowledged when you file your tax return.
Payments scheduled through EFW can be cancelled up to 8 p.m. Eastern time, 2 business days before the scheduled payment date, by contacting the U.S. Treasury Financial Agent at 1-888-353-4537.
You can use your American Express® Card, Discover® Card, MasterCard® card, or Visa® card to make estimated tax payments. Call toll-free or visit the website of either service provider listed below and follow the instructions. A convenience fee will be charged by the service provider based on the amount you are paying. Fees may vary between providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You also can find out what the fee will be by calling the provider's toll-free automated customer service number or visiting the provider's website shown below.
Link2Gov Corporation
1-888-PAY-1040
SM (1-888-729-1040)
1-888-658-5465 (Customer Service)
www.PAY1040.com
Official Payments Corporation
1-800-2PAY-TAX
SM (1-800-272-9829)
1-877-754-4413 (Customer Service)
www.officialpayments.com
The following examples show how to figure estimated tax payments under the regular installment method and under the annualized income installment method.
Early in 2008, Anne and Larry Jones figure their estimated tax payments for the year. They expect to receive the following income during 2008.
Larry's salary | $35,900 |
Unemployment compensation | 600 |
Anne's net profit from self-employment | 40,100 |
Net rental income | 2,784 |
Interest income | 6,205 |
Total | $85,589 |
They also use the following expected items to figure their estimated tax.
Adjustment to income for IRA contributions | $ 1,000 |
Itemized deductions | 11,525 |
Deduction for exemptions ($3,500 × 2) | 7,000 |
2007 total tax | 14,496 |
Withholding | 3,384 |
The Joneses plan to file a joint return. They use the 2008 Estimated Tax Worksheet included in Form 1040-ES to figure their estimated tax payments. See their filled-in worksheet (Figure 2-D) on page 30.
Worksheet 2-2. Expected Self-Employment Tax—Illustrated (Anne Jones)
1. | Enter your expected income and profits subject to self-employment tax* | 1. | $40,100 | ||
2. | Multiply line 1 by 92.35% (.9235) | 2. | 37,032 | ||
3. | Multiply line 2 by 2.9% (.029) | 3. | 1,074 | ||
4. | Social security tax maximum income | 4. | $102,000 | ||
5. | Enter your expected wages (if subject to social security tax) | 5. | -0- | ||
6. | Subtract line 5 from line 4 | 6. | 102,000 | ||
Note.If line 6 is zero or less, enter -0- on line 8 and skip to line 9. | |||||
7. | Enter the smaller of line 2 or line 6 | 7. | 37,032 | ||
8. | Multiply line 7 by 12.4% (.124) | 8. | 4,592 | ||
9. | Add line 3 and line 8. Enter the result here and on line 11 of your 2008 Estimated Tax Worksheet | 9. | $5,666 | ||
10. | Multiply line 9 by .50. This is your expected deduction for one-half of your self-employment tax. | 10. | $2,833 |
*Your net profit from self-employment is found on Schedule C, line 31; Schedule C-EZ, line 3; Schedule F, line 36; Schedule K-1 (Form 1065), box 14, code A; and Schedule K-1 (Form 1065-B), box 9, code J1. |
-
Less than their “required annual payment to avoid a penalty” (line 14c), and
-
Not within $1,000 of their “total 2008 estimated tax” (line 13c).
The facts are the same as in Example 1—Regular Installment Method, except that the Joneses do not expect to receive their income evenly throughout the year. Anne expects to receive the largest portion of her self-employment income during the last few months of the year, and the Joneses' rental income is from a vacation home rented only in the summer months.
After completing their 2008 Estimated Tax Worksheet, the Joneses decide to use the annualized income installment method to see if they can pay less than $2,382 estimated tax for one or more payment periods. They complete the 2008 Annualized Estimated Tax Worksheet (Worksheet 2-8) in this chapter. See their filled-in worksheet (Figure 2-E) on page 31.
On April 1, 2008, the Joneses complete the first column of the worksheet for the period January 1 through March 31. They had the following income for the period.
Larry's salary | $8,975 |
Unemployment compensation | 600 |
Anne's net profit from self-employment | 3,000 |
Net rental income | -0- |
Interest income | 990 |
Total | $13,565 |
They also take into account the following items for the period.
After the end of each remaining payment period, the Joneses complete the column of the worksheet for that period (from the beginning of the year through the end of that payment period) in the same way they did for the first period. They had the following income for each period.
Second
Period |
Third
Period |
Fourth
Period |
|
Jan. 1-
May 31 |
Jan. 1-
Aug. 31 |
Jan. 1-
Dec. 31 |
|
Larry's salary | $14,958 | $23,933 | $35,900 |
Unemployment compensation | 600 | 600 | 600 |
Anne's net profit from self-employment | 6,000 | 16,000 | 40,100 |
Net rental income | 696 | 2,784 | 2,784 |
Interest income | 1,575 | 3,250 | 6,205 |
Total | $23,829 | $46,567 | $85,589 |
They also take into account the following items for each period.
Second
Period |
Third
Period |
Fourth
Period |
|
Jan. 1-
May 31 |
Jan. 1-
Aug. 31 |
Jan. 1-
Dec. 31 |
|
Adjustment to income for IRA contributions | $ 250 | $ 400 | $1,000 |
Itemized deductions | 2,970 | 7,025 | 11,525 |
For the second period, as for the first, the annualized income installment method allows the Joneses to pay less than their required payment under the regular installment method of figuring estimated tax payments. They make up the difference in the third and fourth periods when their income is higher.
Because the Joneses are using the annualized income installment method, they will file Form 2210 with their tax return for 2008.
Table 2-2. Where To Find Worksheets Use the following worksheets and tables to figure your correct estimated tax.
IF you need... | THEN use... | ON page... |
the 2008 Estimated Tax Worksheet (ES Worksheet) | 21, 33 | |
to estimate your taxable social security and railroad retirement benefits—line 1 of ES Worksheet | Worksheet 2-1 | 34 |
to estimate your self-employment (SE) tax and your deduction for one-half of your SE tax—lines 1 and 11 of ES Worksheet | Worksheet 2-2 | 34 |
to reduce your itemized deductions because your estimated AGI is more than $159,950 ($79,975 if married filing separately)—line 2 of ES Worksheet | Worksheet 2-3 | 35 |
to reduce your exemption amount because your estimated AGI is more than $119,975 —line 4 of ES Worksheet | Worksheet 2-4 | 35 |
to estimate your income tax if you have net capital gains or qualified dividends—line 6 of ES Worksheet | Worksheet 2-5 | 36 |
to estimate your income tax if you expect to claim a foreign earned income exclusion or housing exclusion on Form 2555 or Form 2555-EZ—line 6 of ES Worksheet | Worksheet 2-6 | 37 |
to refigure your estimated tax during the year | Worksheet 2-7 | 37 |
to figure your annualized estimated tax payments | Worksheet 2-8 | 38-39 |
to reduce your itemized deductions for line 6 of Worksheet 2-8 because line 3 of Worksheet 2-8 is more than $159,950 ($79,975 if married filing separately) | Worksheet 2-9 | 39 |
to reduce your exemptions for line 10 of Worksheet 2-8 because line 3 of Worksheet 2-8 is more than $119,975 | Worksheet 2-10 | 40 |
to estimate your income tax for line 12 of Worksheet 2-8 if estimated income includes capital gains or qualified dividends | Worksheet 2-11 | 41 |
to estimate your income tax for line 12 of Worksheet 2-8 if you expect to claim a foreign earned income exclusion or housing exclusion on Form 2555 or Form 2555-EZ | Worksheet 2-12 | 42 |
2008 Tax Rate Schedules | 40 | |
2008 Standard Deduction Tables | 43 |
Worksheet 2-1. 2008 Estimated Tax Worksheet—Line 1 Expected Taxable Social Security and Railroad Retirement Benefits
1. | Enter your expected social security and railroad retirement benefits | 1. | |||
2. | Enter one-half of line 1 | 2. | |||
3. | Enter your expected total income. Do not include any social security and railroad retirement benefits, nontaxable interest income, nontaxable IRA distributions, or nontaxable pension distributions | 3. | |||
4. | Enter your expected nontaxable interest income | 4. | |||
5. |
Enter the total of any exclusions or adjustments for:
|
5. | |||
6. | Add lines 2, 3, 4, and 5 | 6. | |||
7. | Enter your expected adjustments to income. Do not include any student loan interest deduction or domestic production activities deduction. | 7. | |||
8. | Subtract line 7 from line 6. If zero or less, stop here. Do not include any social security or railroad retirement benefits in the amount on line 1 of your 2008 Estimated Tax Worksheet | 8. | |||
9. | Enter $25,000 ($32,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year) | 9. | |||
10. | Subtract line 9 from line 8. If zero or less, stop here. Do not include any social security or railroad retirement benefits in the amount on line 1 of your 2008 Estimated Tax Worksheet | 10. | |||
11. | Enter $9,000 ($12,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year) | 11. | |||
12. | Subtract line 11 from line 10. If zero or less, enter -0- | 12. | |||
13. | Enter the smaller of line 10 or line 11 | 13. | |||
14. | Enter one-half of line 13 | 14. | |||
15. | Enter the smaller of line 2 or line 14 | 15. | |||
16. | Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- | 16. | |||
17. | Add lines 15 and 16 | 17. | |||
18. | Multiply line 1 by 85% (.85) | 18. | |||
19. | Expected taxable social security and railroad retirement benefits. Enter the smaller of line 17 or line 18. Include this amount in the total on line 1 of your 2008 Estimated Tax Worksheet | 19. |
Worksheet 2-2. 2008 Estimated Tax Worksheet—Lines 1 and 11 Expected Self-Employment Tax and Deduction
1. | Enter your expected income and profits subject to self-employment tax* | 1. | |||
2. | Multiply line 1 by 92.35% (.9235) | 2. | |||
3. | Multiply line 2 by 2.9% (.029) | 3. | |||
4. | Social security tax maximum income | 4. | $102,000 | ||
5. | Enter your expected wages (if subject to social security tax or the 6.2% portion of tier 1 railroad retirement tax) | 5. | |||
6. | Subtract line 5 from line 4 | 6. | |||
Note. If line 6 is zero or less, enter -0- on line 8 and skip to line 9. | |||||
7. | Enter the smaller of line 2 or line 6 | 7. | |||
8. | Multiply line 7 by 12.4% (.124) | 8. | |||
9. | Add line 3 and line 8. Enter the result here and on line 11 of your 2008 Estimated Tax Worksheet | 9. | |||
10. | Multiply line 9 by .50. This is your expected deduction for one-half of your self-employment tax. Subtract this amount when figuring your expected AGI on line 1 of your 2008 Estimated Tax Worksheet. | 10. |
*Your net profit from self-employment is found on Schedule C, line 31; Schedule C-EZ, line 3; Schedule F, line 36; Schedule K-1 (Form 1065), box 14, code A; and Schedule K-1 (Form 1065-B), box 9, code J1. |
Worksheet 2-3. 2008 Estimated Tax Worksheet—Line 2 Phaseout of Itemized Deductions
1. | Enter the estimated total of your itemized deductions (after applying any limits, such as the 7.5%-of-AGI limit on medical expenses) | 1. | |||
2. | Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses (after applying the same limits used in line 1) | 2. | |||
3. | Subtract line 2 from line 1 | 3. | |||
Note. If line 3 is zero or less, your deduction is not limited. Stop here and enter line 1 of this worksheet on line 2 of your 2008 Estimated Tax Worksheet. | |||||
4. | Multiply line 3 by 80% (.80) | 4. | |||
5. | Enter the amount from line 1 of the 2008 Estimated Tax Worksheet | 5. | |||
6. | Enter $159,950 ($79,975 if married filing separately) | 6. | |||
7. | Subtract line 6 from line 5 | 7. | |||
Note. If line 7 is zero or less, your deduction is not limited. Stop here and enter line 1 of this worksheet on line 2 of your 2008 Estimated Tax Worksheet. | |||||
8. | Multiply line 7 by 3% (.03) | 8. | |||
9. | Enter the smaller of line 4 or line 8 | 9. | |||
10. | Divide line 9 by 1.5. | 10. | |||
11. | Subtract line 10 from line 9 | 11. | |||
12. | Total itemized deductions. Subtract line 11 from line 1. Enter the result here and on line 2 of your 2008 Estimated Tax Worksheet | 12. |
Worksheet 2-4. 2008 Estimated Tax Worksheet—Line 4 Reduction of Exemption Amount
1. | Multiply $3,500 by the number of exemptions you plan to claim | 1. | ||||
2. | Enter the amount from line 1 of your 2008 Estimated Tax Worksheet | 2. | ||||
3. | Enter the amount shown below for your filing status. | |||||
Single—$159,950 | ||||||
Married filing jointly or qualifying widow(er)—$239,950 | ||||||
Married filing separately—$119,975 | ||||||
Head of household—$199,950 | 3. | |||||
4. | Subtract line 3 from line 2 | 4. | ||||
5. | Is line 4 more than $122,500 (more than $61,250 if married filing separately)? | |||||
Yes. Multiply $2,333 by the number of exemptions you plan to claim and enter the result here and on line 4 of your 2008 Estimated Tax Worksheet. Do not complete the rest of this worksheet. | ||||||
No. Divide line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next higher whole number (for example, increase 0.0004 to 1) | 5. | |||||
6. | Multiply line 5 by 2% (.02). Enter the result as a decimal | 6. | . | |||
7. | Multiply line 1 by line 6 | 7. | ||||
8. | Divide line 7 by 3.0 | 8. | ||||
9. | Deduction for exemptions. Subtract line 8 from line 1. Enter the result here and on line 4 of your 2008 Estimated Tax Worksheet | 9. |
Worksheet 2-5. 2008 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet
1. | Enter the amount from line 5 of your 2008 Estimated Tax Worksheet (or if using Worksheet 2-6, enter the amount from line 3 of Worksheet 2-6) | 1. | |||||||
2. | Enter your expected qualified dividends for 2008 1 | 2. | |||||||
3. | Enter the net capital gain expected for 2008 1 | 3. | |||||||
4. | Add lines 2 and 3 | 4. | |||||||
5. | Enter your 28% rate gain or loss expected for 2008 2 | 5. | |||||||
6. | Enter the unrecaptured section 1250 gain expected for 2008 | 6. | |||||||
7. | Add lines 5 and 6 | 7. | |||||||
8. | Enter the smaller of line 3 or line 7 | 8. | |||||||
9. | Subtract line 8 from line 4 | 9. | |||||||
10. | Subtract line 9 from line 1. If zero or less, enter -0- | 10. | |||||||
11. | Enter the smaller of line 1 or $65,100 ($32,550 if single or married filing separately, or $43,650 if head of household) | 11. | |||||||
12. | Enter the smaller of line 10 or line 11 | 12. | |||||||
13. | Subtract line 4 from line 1. If zero or less, enter -0- | 13. | |||||||
14. | Enter the larger of line 12 or line 13 | 14. | |||||||
Note.If line 11 and line 12 are the same, skip line 15 and go to line 16. | |||||||||
15. | Subtract line 12 from line 11 | 15. | |||||||
Note. If lines 1 and 11 are the same, skip lines 16-28 and go to line 29. | |||||||||
16. | Enter the smaller of line 1 or line 9 | 16. | |||||||
17. | Enter the amount from line 15. If line 15 is blank, enter -0- | 17. | |||||||
18. | Subtract line 17 from line 16. If zero or less, enter -0- | 18. | |||||||
19. | Multiply line 18 by 15% (.15) | 19. | |||||||
Note.If line 6 is zero or blank, skip lines 20-25 and go to line 26. | |||||||||
20. | Enter the smaller of line 3 or line 6 | 20. | |||||||
21. | Add lines 4 and 14 | 21. | |||||||
22. | Enter the amount from line 1 above | 22. | |||||||
23. | Subtract line 22 from line 21. If zero or less, enter -0- | 23. | |||||||
24. | Subtract line 23 from line 20. If zero or less, enter -0- | 24. | |||||||
25. | Multiply line 24 by 25% (.25) | 25. | |||||||
Note.If line 5 is zero or blank, skip lines 26-28 and go to line 29. | |||||||||
26. | Add lines 14, 15, 18, and 24 | 26. | |||||||
27. | Subtract line 26 from line 1 | 27. | |||||||
28. | Multiply line 27 by 28% (.28) | 28. | |||||||
29. | Figure the tax on the amount on line 14 from the 2008 Tax Rate Schedules | 29. | |||||||
30. | Add lines 19, 25, 28, and 29 | 30. | |||||||
31. | Figure the tax on the amount on line 1 from the 2008 Tax Rate Schedules | 31. | |||||||
32. | Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 30 or line 31 here and on line 6 of the 2008 Estimated Tax Worksheet (or if using Worksheet 2-6, enter on line 4 of Worksheet 2-6) | 32. |
1 If you expect to deduct investment interest expense, do not include on this line any qualified dividends or net capital gain that you will elect to treat as investment income. |
2 This includes a section 1202 exclusion from eligible gain on qualified small business stock and gain or loss from the sale or exchange of collectibles. See the instructions for Schedule D (Form 1040) for more information. |
Before you begin: If line 5 of your 2008 Estimated Tax Worksheet is zero, do not complete this worksheet. | ||||||||
1. | Enter the amount from line 5 of your 2008 Estimated Tax Worksheet | 1. | ||||||
2. | Enter the total foreign earned income and housing amount you (and your spouse if filing jointly) expect to exclude in 2008 on Form 2555 or Form 2555-EZ | 2. | ||||||
3. | Add lines 1 and 2 | 3. | ||||||
4. | Tax on the amount on line 3. Use the 2008 Tax Rate Schedules or Worksheet 2-5,* as appropriate | 4. | ||||||
5. | Tax on the amount on line 2. Use the 2008 Tax Rate Schedules | 5. | ||||||
6. | Subtract line 5 from line 4. Enter the result here and on line 6 of your 2008 Estimated Tax Worksheet. If zero or less, enter -0- | 6. | ||||||
*If using Worksheet 2-5 (Qualified Dividends and Capital Gain Tax
Worksheet), enter the amount from line 3 above on line 1 of Worksheet
2-5. Complete Worksheet 2-5 through line 9. Next, determine if you have a capital gain excess. |
||||||||
Figuring capital gain excess. To find out if you have a capital gain
excess, subtract line 5 of your 2008 Estimated Tax Worksheet from
line 9 of Worksheet 2-5. If the result is more than zero, that amount is your capital gain excess. |
||||||||
No capital gain excess. If you do not have a
capital gain excess, complete the rest of Worksheet 2-5 according to its instructions.
Then complete lines 5 and 6 above. |
||||||||
Capital gain excess. If you have a capital gain
excess, complete a second Worksheet 2-5 as instructed above but in its entirety and
with the following additional modifications. Then complete lines 5 and 6 above. |
||||||||
Make these modifications only for purposes of filling out Worksheet 2-6 above. | ||||||||
a. Reduce the amount you otherwise would enter on line 3 of Worksheet 2-5 (but not below zero) by your capital gain excess. | ||||||||
b. Reduce the amount you otherwise would enter on line 2 of Worksheet 2-5 (but not below zero) by any of your capital gain excess not used in (a) above. | ||||||||
c. Reduce the amount you otherwise would enter on line 5 of Worksheet 2-5 (but not below zero) by your capital gain excess. | ||||||||
d. Reduce the amount you otherwise would enter on line 6 of Worksheet 2-5 (but not below zero) by your capital gain excess. |
Worksheet 2-7. Amended Estimated Tax Worksheet
1. | Amended total estimated tax due | 1. | ||||
2. | Multiply line 1 by: | |||||
50% (.50) if next payment is due June 16, 2008 | ||||||
75% (.75) if next payment is due September 15, 2008 | ||||||
100% (1.00) if next payment is due January 15, 2009 | 2. | |||||
3. | Estimated tax payments made for all previous periods | 3. | ||||
4. | Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment | 4. | ||||
Note.If the payment on line 4 is due January 15, 2009, stop here. Otherwise, go to line 5. | ||||||
5. | Add lines 3 and 4 | 5. | ||||
6. | Subtract line 5 from line 1 and enter the result (but not less than zero) | 6. | ||||
7. | Each following required payment: If the payment on line 4 is due June 16, 2008, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 15, 2008, and January 15, 2009. If the amount on line 4 is due September 15, 2008, enter the full amount on line 6 here and on the payment voucher for your payment due January 15, 2009 | 7. | ||||
Worksheet 2-8. 2008 Annualized Estimated Tax Worksheet
Note.For instructions, see Annualized Income Installment Method in chapter 2.
Section A (For Figuring Your Annualized Estimated Tax Payments)—Complete each column after end of period shown. | |||||||
Estates and trusts: Use the following ending dates in
columns (a)-(d)—2/29, 4/30, 7/31, 11/30. |
(a)
1/1/08 to 3/31/08 |
(b)
1/1/08 to 5/31/08 |
(c)
1/1/08 to 8/31/08 |
(d)
1/1/08 to 12/31/08 |
|||
1 | Adjusted gross income (AGI) for each period. (Caution: See instructions.) Self-employed: Complete Section B first | 1 | |||||
2 | Annualization amounts | 2 | 4 | 2.4 | 1.5 | 1 | |
3 | Annualized income. Multiply line 1 by line 2 | 3 | |||||
4 | Itemized deductions for period (see instructions). If you do not expect to itemize, enter -0- and skip to line 7 | 4 | |||||
5 | Annualization amounts | 5 | 4 | 2.4 | 1.5 | 1 | |
6 | Multiply line 4 by line 5. (Caution: See instructions and Worksheet 2-9.) | 6 | |||||
7 | Standard deduction from 2008 tables | 7 | |||||
8 | Enter the larger of line 6 or line 7 | 8 | |||||
9 | Subtract line 8 from line 3 | 9 | |||||
10 | Multiply $3,500 by your total expected exemptions. (Caution: See instructions and Worksheet 2-10.) | 10 | |||||
11 | Subtract line 10 from line 9 | 11 | |||||
12 | Tax on the amount on line 11 from the 2008 Tax Rate Schedules. (Caution: See instructions and Worksheets 2-11 and 2-12.) | 12 | |||||
13 | Self-employment tax from line 37 of Section B | 13 | |||||
14 | Other taxes for each payment period | 14 | |||||
15 | Total tax. Add lines 12, 13, and 14 | 15 | |||||
16 |
Credits for each period. (Caution: See instructions.)
Do not include any income tax withholding on this line |
16 | |||||
17 | Subtract line 16 from line 15. (If less than zero, enter -0-.) | 17 | |||||
18 | Applicable percentage | 18 | 22.5% | 45% | 67.5% | 90% | |
19 | Multiply line 17 by line 18 | 19 | |||||
20 | Add amounts on line 25 of all preceding columns | 20 | |||||
21 | Annualized income installment. Subtract line 20 from line 19. (If less than zero, enter -0-.) | 21 | |||||
22 | Enter 25% (.25) of line 14c of the Form 1040-ES Estimated Tax Worksheet in each column | 22 | |||||
23 | Subtract line 25 of preceding column from line 24 of preceding column | 23 | |||||
24 | Add lines 22 and 23 | 24 | |||||
25 | Enter the smaller of line 21 or line 24. (Caution: See instructions.) | 25 | |||||
26 | Total required payments for the period. Add lines 20 and 25 | 26 | |||||
27 | Estimated tax payments made (line 28 of preceding columns) and tax withholding through the due date for the period | 27 | |||||
28 | Estimated tax payment required by the next due date. Subtract line 27 from line 26 and enter the result (but not less than zero) here and on your payment voucher | 28 |
(Continued on next page) | |
Worksheet 2-8. 2008 Annualized Estimated Worksheet(Continued)
Section B (For Figuring Your Annualized Estimated Self-Employment Tax)—Complete each column after end of period shown. | |||||||
(a)
1/1/08 to 3/31/08 |
(b)
1/1/08 to 5/31/08 |
(c)
1/1/08 to 8/31/08 |
(d)
1/1/08 to 12/31/08 |
||||
29 | Net earnings from self-employment for the period | 29 | |||||
30 | Prorated social security tax limit | 30 | $25,500 | $42,500 | $68,000 | $102,000 | |
31 | Enter actual wages for the period subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax | 31 | |||||
32 | Subtract line 31 from line 30. If zero or less, enter -0- | 32 | |||||
33 | Annualization amounts | 33 | 0.496 | 0.2976 | 0.186 | 0.124 | |
34 | Multiply line 33 by the smaller of line 29 or line 32 | 34 | |||||
35 | Annualization amounts | 35 | 0.116 | 0.0696 | 0.0435 | 0.029 | |
36 | Multiply line 29 by line 35 | 36 | |||||
37 | Add lines 34 and 36. Enter the result here and on line 13 of Section A | 37 | |||||
38 | Annualization amounts | 38 | 8 | 4.8 | 3 | 2 | |
39 | Deduction for one-half of self-employment tax. Divide line 37 by line 38. Enter the result here. Use this result to figure your AGI on line 1 | 39 |
Worksheet 2-9. 2008 Annualized Estimated Tax Worksheet—Line 6 Phaseout of Itemized Deductions
1. | Enter line 4 of Section A | 1. | |||
2. | Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses (after applying the same limits used in line 1) | 2. | |||
3. | Subtract line 2 from line 1 | 3. | |||
4. | Enter line 5 of Section A | 4. | |||
5. | Multiply line 1 by line 4 | 5. | |||
Note.If line 3 is zero or less, your deduction is not limited. Stop here and enter line 5 above on line 6 of Section A. | |||||
6. | Multiply line 3 by line 4 | 6. | |||
7. | Multiply line 6 by 80% (.80) | 7. | |||
8. | Enter line 3 of Section A | 8. | |||
9. | Enter $159,950 ($79,975 if married filing separately) | 9. | |||
10. | Subtract line 9 from line 8 | 10. | |||
Note. If line 10 is zero or less, your deduction is not limited. Stop here and enter line 5 of this worksheet on line 6 of Section A. | |||||
11. | Multiply line 10 by 3% (.03) | 11. | |||
12. | Enter the smaller of line 7 or line 11 | 12. | |||
13. | Divide line 12 by 1.5 | 13. | |||
14. | Subtract line 13 from line 12 | 14. | |||
15. | Total itemized deductions. Subtract line 14 from line 5. Enter the result here and in the appropriate column of Section A, line 6 | 15. |
Worksheet 2-10. 2008 Annualized Estimated Tax Worksheet—Line 10 Reduction of Exemption Amount
1. | Multiply $3,500 by the number of exemptions you plan to claim | 1. | ||||
2. | Enter line 3 of Section A | 2. | ||||
3. | Enter the amount shown below for your filing status | |||||
Single—$159,950
Married filing jointly or qualifying widow(er)—$239,950 Married filing separately—$119,975 Head of household—$199,950 |
3. | |||||
4. | Subtract line 3 from line 2 | 4. | ||||
5. | Is line 4 more than $122,500 (more than $61,250 if married filing separately)? | |||||
Yes. Multiply $2,333 by the number of exemptions you plan to claim and enter the result here and on line 10 of Section A. Do not complete the rest of this worksheet. | ||||||
No. Divide line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next higher whole number (for example, increase 0.0004 to 1) | 5. | |||||
6. | Multiply line 5 by 2% (.02). Enter the result as a decimal | 6. | . | |||
7. | Multiply line 1 by line 6 | 7. | ||||
8. | Divide line 7 by 3.0 | 8. | ||||
9. | Deduction for exemptions. Subtract line 8 from line 1. Enter the result here and in the appropriate column of Section A, line 10 | 9. |
2008 Tax Rate Schedules
Caution.Do not use these Tax Rate Schedules to figure your 2007 taxes. Use them only to figure your 2008 estimated taxes.
Schedule X—Use if your 2008 filing status is Single |
Schedule Z—Use if your 2008 filing status is
Head of household |
||||||||||||
If line 5 is: | The tax is: | of the | If line 5 is: | The tax is: | of the | ||||||||
Over— |
But not
over— |
amount over— | Over— |
But not
over— |
amount over— | ||||||||
$0 | $8,025 | 10% | $0 | $0 | $11,450 | 10% | $0 | ||||||
8,025 | 32,550 | $802.50 | + | 15% | 8,025 | 11,450 | 43,650 | $1,145.00 | + | 15% | 11,450 | ||
32,550 | 78,850 | 4,481.25 | + | 25% | 32,550 | 43,650 | 112,650 | 5,975.00 | + | 25% | 43,650 | ||
78,850 | 164,550 | 16,056.25 | + | 28% | 78,850 | 112,650 | 182,400 | 23,225.00 | + | 28% | 112,650 | ||
164,550 | 357,700 | 40,052.25 | + | 33% | 164,550 | 182,400 | 357,700 | 42,755.00 | + | 33% | 182,400 | ||
357,700 | - - - - - - | 103,791.75 | + | 35% | 357,700 | 357,700 | - - - - - - | 100,604.00 | + | 35% | 357,700 | ||
Schedule Y-1—Use if your 2008 filing status is
Married filing jointly or Qualifying widow(er) |
Schedule Y-2—Use if your 2008 filing status is
Married filing separately |
||||||||||||
If line 5 is: | The tax is: | of the | If line 5 is: | The tax is: | of the | ||||||||
Over— |
But not
over— |
amount over— | Over— |
But not
over— |
amount over— | ||||||||
$0 | $16,050 | 10% | $0 | $0 | $8,025 | 10% | $0 | ||||||
16,050 | 65,100 | $1,605.00 | + | 15% | 16,050 | 8,025 | 32,550 | $802.50 | + | 15% | 8,025 | ||
65,100 | 131,450 | 8,962.50 | + | 25% | 65,100 | 32,550 | 65,725 | 4,481.25 | + | 25% | 32,550 | ||
131,450 | 200,300 | 25,550.00 | + | 28% | 131,450 | 65,725 | 100,150 | 12,775.00 | + | 28% | 65,725 | ||
200,300 | 357,700 | 44,828.00 | + | 33% | 200,300 | 100,150 | 178,850 | 22,414.00 | + | 33% | 100,150 | ||
357,700 | - - - - - - | 96,770.00 | + | 35% | 357,700 | 178,850 | - - - - - - | 48,385.00 | + | 35% | 178,850 | ||
Worksheet 2-11. 2008 Annualized Estimated Tax Worksheet—Line 12 Qualified Dividends and Capital Gain Tax Worksheet
Note. To figure the annualized entries for lines 2, 3, 5, and 6 below, multiply the expected amount for the period by the annualization amount on line 2 of Worksheet 2-8 for the same period. | |||||||||
1. | Enter line 11 of your 2008 Annualized Estimated Tax Worksheet (or if using Worksheet 2-12, enter the amount from line 3 of Worksheet 2-12) | 1. | |||||||
2. | Enter your annualized qualified dividends expected for 2008 1 | 2. | |||||||
3. | Enter the annualized net capital gain expected for 2008 1 | 3. | |||||||
4. | Add lines 2 and 3 | 4. | |||||||
5. | Enter your annualized 28% rate gain or loss expected for 2008 2 | 5. | |||||||
6. | Enter the annualized unrecaptured section 1250 gain expected for 2008 | 6. | |||||||
7. | Add lines 5 and 6 | 7. | |||||||
8. | Enter the smaller of line 3 or line 7 | 8. | |||||||
9. | Subtract line 8 from line 4 | 9. | |||||||
10. | Subtract line 9 from line 1. If zero or less, enter -0- | 10. | |||||||
11. | Enter the smaller of line 1 or $65,100 ($32,550 if single or married filing separately, or $43,650 if head of household) | 11. | |||||||
12. | Enter the smaller of line 10 or line 11 | 12. | |||||||
13. |
Subtract line 4 from line 1. If zero or less,
enter -0- |
13. |
|||||||
14. | Enter the larger of line 12 or line 13 | 14. | |||||||
Note.If line 11 and line 12 are the same, skip line 15 and go to line 16. | |||||||||
15. | Subtract line 12 from line 11 | 15. | |||||||
Note.If lines 1 and 11 are the same, skip lines 16-28 and go to line 29. | |||||||||
16. | Enter the smaller of line 1 or line 9 | 16. | |||||||
17. | Enter the amount from line 15. If line 15 is blank, enter -0- | 17. | |||||||
18. | Subtract line 17 from line 16. If zero or less, enter -0- | 18. | |||||||
19. | Multiply line 18 by 15% (.15) | 19. | |||||||
Note.If line 6 is zero or blank, skip lines 20-25 and go to line 26. | |||||||||
20. | Enter the smaller of line 3 or line 6 | 20. | |||||||
21. | Add lines 4 and 14 | 21. | |||||||
22. | Enter the amount from line 1 above | 22. | |||||||
23. | Subtract line 22 from line 21. If zero or less, enter -0- | 23. | |||||||
24. | Subtract line 23 from line 20. If zero or less, enter -0- | 24. | |||||||
25. | Multiply line 24 by 25% (.25) | 25. | |||||||
Note.If line 5 is zero or blank, skip lines 26-28 and go to line 29. | |||||||||
26. | Add lines 14, 15, 18, and 24 | 26. | |||||||
27. | Subtract line 26 from line 1 | 27. | |||||||
28. | Multiply line 27 by 28% (.28) | 28. | |||||||
29. | Figure the tax on the amount on line 14 from the 2008 Tax Rate Schedules | 29. | |||||||
30. | Add lines 19, 25, 28, and 29 | 30. | |||||||
31. | Figure the tax on the amount on line 1 from the 2008 Tax Rate Schedules | 31. | |||||||
32. | Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 30 or line 31 here and in the appropriate column of the 2008 Annualized Estimated Tax Worksheet, line 12 (or if using Worksheet 2-12, enter on line 4 of Worksheet 2-12) | 32. |
1 If you expect to deduct investment interest expense, do not include on this line any qualified dividends or net capital gain that you will elect to treat as investment income. |
2 This includes a section 1202 exclusion from eligible gain on qualified small business stock and gain or loss from the sale or exchange of collectibles. See the instructions for Schedule D (Form 1040) for more information. |
Before you begin: | If line 11 of Worksheet 2-8 (2008 Annualized Estimated Tax Worksheet) is zero for the period, do not complete this worksheet. | |||||||
1. | Enter the amount from line 11 of your 2008 Annualized Estimated Tax Worksheet for the period | 1. | ||||||
2. | Enter the annualized amount* of foreign earned income and housing amount you (and your spouse if filing jointly) expect to exclude for the period on Form 2555 or Form 2555-EZ | 2. | ||||||
3. | Add lines 1 and 2 | 3. | ||||||
4. | Tax on the amount on line 3. Use the 2008 Tax Rate Schedules or Worksheet 2-11,** as appropriate | 4. | ||||||
5. | Tax on the amount on line 2. Use the 2008 Tax Rate Schedules | 5. | ||||||
6. | Subtract line 5 from line 4. Enter the result here and on line 12 of your 2008 Annualized Estimated Tax Worksheet (Worksheet 2-8). If zero or less, enter -0- | 6. | ||||||
* To figure the annualized amount for line 2, multiply the expected exclusion for the period by the annualization amount on line 2 of Worksheet 2-8 for the same period. | ||||||||
**If using Worksheet 2-11 (Qualified Dividends and Capital Gain Tax Worksheet), enter the amount from line 3 above on line 1 of Worksheet 2-11. Complete Worksheet 2-11 through line 9. Next, determine if you have a capital gain excess. | ||||||||
Figuring capital gain excess. To find out if you have a
capital gain excess for the appropriate period, subtract line 11 of Worksheet
2-8 from line 9 of Worksheet 2-11. If the result is more than zero, that amount is your capital gain excess. |
||||||||
No capital gain excess. If you do not have a
capital gain excess, complete the rest of Worksheet 2-11 according to its instructions.
Then complete lines 5 and 6 above. |
||||||||
Capital gain excess. If you have a capital gain excess, complete a second Worksheet 2-11 as instructed above but in its entirety and with the following additional modifications. Then complete lines 5 and 6 above. | ||||||||
Make these modifications only for purposes of filling out Worksheet 2-12 above. | ||||||||
a. Reduce the amount you otherwise would enter on line 3 of Worksheet 2-11 (but not below zero) by your capital gain excess. | ||||||||
b. Reduce the amount you otherwise would enter on line 2 of Worksheet 2-11 (but not below zero) by any of your capital gain excess not used in (a) above. | ||||||||
c. Reduce the amount you otherwise would enter on line 5 of Worksheet 2-11 (but not below zero) by your capital gain excess. | ||||||||
d. Reduce the amount you otherwise would enter on line 6 of Worksheet 2-11 (but not below zero) by your capital gain excess. |
If you are married filing a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were born before January 2, 1944, or you are blind.
IF your filing status is... | THEN your standard deduction is... |
---|---|
Single or Married filing separately | $5,450 |
Married filing jointly or
Qualifying widow(er) with dependent child |
10,900 |
Head of household | 8,000 |
* Do not use this chart if you were born before January 2, 1944, or you are blind, or if someone else can claim an exemption for you (or your spouse if married filing jointly). Use Table 2-4 or 2-5 instead. |
Check the correct number of boxes below. Then go to the chart. | ||
You |
Born before January 2, 1944
|
Blind |
Your spouse, if claiming spouse's exemption |
Born before January 2, 1944
|
Blind |
Total number of boxes you checked | ||
IF your
filing status is... |
AND the number in the box above is... | THEN your standard deduction is... |
Single | 1 | $6,800 |
2 | 8,150 | |
Married filing jointly or | 1 | 11,950 |
Qualifying widow(er) | 2 | 13,000 |
with dependent child | 3 | 14,050 |
4 | 15,100 | |
Married filing | 1 | 6,500 |
separately | 2 | 7,550 |
3 | 8,600 | |
4 | 9,650 | |
Head of household | 1 | 9,350 |
2 | 10,700 |
* If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 2-5, instead. |
Use this worksheet only if someone else can claim an exemption for you (or your spouse if married filing jointly).
If you were born before January 2, 1944, or you are blind, check the correct number of boxes below. Then go to the worksheet. | ||
You |
Born before January 2, 1944
|
Blind |
Your spouse, if claiming spouse's exemption |
Born before January 2, 1944
|
Blind |
Total number of boxes you checked |
1. | Enter your earned income (defined below). If none, enter -0-. | 1. | ||
2. | Additional amount | 2. | $300 | |
3. | Add lines 1 and 2. | 3. | ||
4. | Minimum standard deduction. | 4. | $900 | |
5. | Enter the larger of line 3 or line 4. | 5. | ||
6. | Enter the amount shown below for your filing status. | |||
• | Single or Married filing separately— $5,450 | 6. | ||
• | Married filing jointly—$10,900 | |||
• | Head of household—$8,000 | |||
7. | Standard deduction. | |||
a. | Enter the smaller of line 5 or line 6. If born after January 1, 1944, and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b. | 7a. | ||
b. | If born before January 2, 1944, or blind, multiply $1,350 ($1,050 if married) by the number in the box above. | 7b. | ||
c. | Add lines 7a and 7b. This is your standard deduction for 2008. | 7c. | ||
Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income. |
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