Page 32 - Tax withholding and Estimated Taxes

12:15 - 17-Jun-2020
Page 30 of 47
Fileid: … tions/P505/2020/A/XML/Cycle03/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Your employer is responsible for with- 2. On line 1, enter your income for the period 2019 return, treat the credit as a payment made
holding the 0.9% Additional Medicare Tax that is effectively connected with a U.S. on April 15, 2020.
on Medicare wages or RRTA compensa- trade or business.
tion it pays you in excess of $200,000 in 3. On line 21, increase your entry by the If you are a beneficiary of an estate or trust,
2020. You should consider this withhold- amount determined by multiplying your in- and the trustee elects to credit 2020 trust pay-
ing, if applicable, in determining whether come for the period that isn’t effectively ments of estimated tax to you, you can treat the
you need to make an estimated payment. connected with a U.S. trade or business amount credited as paid by you on January 15,
2021.
6. Net Investment Income Tax (NIIT). The by the following.
NIIT is 3.8% of the lesser of your net in- a. 72% (0.72) for column (b). If you choose to have an overpayment of tax
vestment income or the excess of your credited to your estimated tax, you can’t have
MAGI over a specified threshold amount. b. 45% (0.45) for column (c). any of that amount refunded to you until you file
Threshold amounts: your tax return for the following year. You also
c. 30% (0.30) for column (d). can’t use that overpayment in any other way.
Filing Status Threshold Amount However, if you can use a treaty rate Example. When Kathleen finished filling
Married filing jointly $250,000 lower than 30%, use the percentages de- out her 2019 tax return, she saw that she had
termined by multiplying your treaty rate by
Married filing separately $125,000 2.4, 1.5, and 1, respectively. overpaid her taxes by $750. Kathleen knew she
Single $200,000 4. On line 26, enter one-half of the amount would owe additional tax in 2020. She credited
$600 of the overpayment to her 2020 estimated
Head of household $200,000 from line 14c of the Form 1040-ES (NR) tax and had the remaining $150 refunded to
Qualifying widow(er) $250,000 2020 Estimated Tax Worksheet in column her.
(b), and one-fourth in columns (c) and (d) In September, she amended her 2019 return
Line 20. Include all the refundable credits of Worksheet 2-7. by filing Form 1040-X, Amended U.S. Individual
(other than withholding credits) you can claim 5. On lines 24 and 27, skip column (b). Income Tax Return. It turned out that she owed
because of events that occurred during the pe- $250 more in tax than she had thought. This re-
riod. These include the earned income credit, 6. On line 31, if you don’t use the actual with- duced her 2019 overpayment from $750 to
additional child tax credit, fuel tax credit, net holding method, include one-half of your $500. Because the $750 had already been ap-
premium tax credit, any refundable credit from total expected withholding in column (b) plied to her 2020 estimated tax or refunded to
Form 8885, and refundable American opportu- and one-fourth in columns (c) and (d). her, the IRS billed her for the additional $250
nity credit. See Pub. 519 for more information. she owed, plus penalties and interest. Kathleen
could not use any of the $600 she had credited
Note. When figuring your refundable credits
for each period, annualize any item of income Estimated Tax to her 2020 estimated tax to pay this bill.
or deduction used to figure each credit. Payments Not Required Pay Online

Line 29. If line 28 is smaller than line 25 and You don’t have to pay estimated tax if your with- IRS offers an electronic payment option that is
you are not certain of the estimate of your 2020 holding in each payment period is at least as right for you. Paying online is convenient and
tax, you can avoid a penalty by entering the much as: secure and helps make sure we get your pay-
amount from line 25 on line 29. • One-fourth of your required annual pay- ments on time. To pay your taxes online or for
ment, or
Line 31. For each period, include estimated • Your required annualized income install- more information, go to IRS.gov/Payments. You
can pay using any of the following methods.
tax payments made and any excess social se- ment for that period.
curity and railroad retirement tax. • IRS Direct Pay. For online transfers di-
rectly from your checking or savings ac-
Also, include estimated federal income tax You also don’t have to pay estimated tax if count at no cost to you, go to IRS.gov/
withholding. One-fourth of your estimated with- you will pay enough through withholding to Payments.
holding is considered withheld on the due date keep the amount you will owe with your return • Pay by Card. To pay by debit or credit
of each payment period. To figure the amount under $1,000. card, go to IRS.gov/Payments. There is a
to include on line 31 for each period, multiply convenience fee charged by these service
your total expected withholding for 2020 by: providers.
• 25% (0.25) for the first period, How To Pay • Electronic Funds Withdrawal (EFW) is
• 50% (0.50) for the second period, an integrated e-file/e-pay option offered
• 75% (0.75) for the third period, and Estimated Tax when filing your federal taxes electronically
• 100% (1.00) for the fourth period. using tax preparation software, through a
However, you may choose to include your There are several ways to pay estimated tax. tax professional, or the IRS at IRS.gov/
withholding according to the actual dates on • Credit an overpayment on your 2019 return Payments.
which the amounts will be withheld. For each to your 2020 estimated tax. • Online Payment Agreement. If you can’t
period, include withholding made from the be- • Pay by direct transfer from your bank ac- pay in full by the due date of your tax re-
ginning of the period up to and including the count, or pay by debit or credit card using turn, you can apply for an online monthly
payment due date. You can make this choice a pay-by-phone system or the Internet. installment agreement at IRS.gov/OPA.
separately for the taxes withheld from your wa- • Send in your payment (check or money or- Once you complete the online process,
ges and all other withholding. For an explana- der) with a payment voucher from Form you will receive immediate notification of
tion of what to include in withholding, see Total 1040-ES. whether your agreement has been ap-
Estimated Tax Payments Needed—Line 14a, proved. A user fee is charged.
earlier. Credit an Overpayment • IRS2Go is the mobile application of the
IRS; you can access Direct Pay or Pay by
Nonresident aliens. If you will file Form Card by downloading the application.
1040-NR and you don’t receive wages as an If you show an overpayment of tax after com-
employee subject to U.S. income tax withhold- pleting your Form 1040 or 1040-SR for 2019,
you can apply part or all of it to your estimated Pay by Phone
ing, the instructions for the worksheet are modi-
fied as follows. tax for 2020. On Form 1040 or 1040-SR, enter Paying by phone is another safe and secure
the amount you want credited to your estimated
1. Skip column (a). tax rather than refunded. Take the amount you method of paying electronically. Use one of the
have credited into account when figuring your following methods: (1) call one of the debit or
estimated tax payments. If you timely file your credit card service providers, or (2) use the
Page 30 Chapter 2 Estimated Tax for 2020