IRS TAX TIPS 2005

IRS TAX TIP 2005-13: Estimated Tax for Individuals

Estimated tax is the method used to pay tax on income that is not subject to withholding (for example, earnings from self-employment, interest, dividends, rents, alimony, etc.). In addition, unless you have elected voluntary withholding, you should make estimated tax payments on the taxable portion of your U.S. social security benefits. In most cases, you must make estimated tax payments if you expect to owe at least $1,000 in tax for 2005 (after subtracting your withholdings and credits) and you expect your withholdings and credits to be less than the smaller of:

1. 90% of the tax shown on your 2005 tax return, or        

2. The tax shown on your 2004 tax return (110% of that amount if you are not a farmer or fisherman and the adjusted gross income shown on that tax return is more than $150,000; more than  $75,000 if married filing separately for 2005).

Exception. You do not have to pay estimated tax if you were a U.S. citizen or resident alien for all of 2004 and you had no tax liability for the full 12-month 2004 tax year. For further information or to pay any estimated tax for 2005, get IRS Form 1040-ES. For more information visit us online at: www.irs.gov