Taxpayers may redesignate estimated income tax payments.The Service announced that taxpayers may redesignate their current-year estimated income tax overpayments as deposits to satisfy their employment tax obligations (Ann. 2001-112). The announcement addressed the situation in which taxpayers have already made estimated tax Federal and state tax laws require a quarterly payment of estimated taxes due from corporations, trusts, estates, non-wage employees, and wage employees with income not subject to withholding. payments that equaled or exceeded their income tax liability for the current year. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. cautions, however, that if the redesignation reduces the estimated payments below that necessary to satisfy the taxpayer's current obligation, the taxpayer could incur penalties. An accompanying document, Treasury News from the Office of Public Affairs, dated Oct. 26, 2001, indicated that business taxpayers may use this procedure to help improve cashflow.
Many taxpayers have informed the Service that their tax liability for the current year will be lower than their estimated income tax payments, because of the economic disruptions caused by the Sept. 11, 2001 terrorist attacks. Ann. 2001-112 clarified that the IRS will allow taxpayers to redesignate estimated income tax payments (in whole or in part) as tax deposits to satisfy obligations to deposit employment taxes imposed by Chapters 21 (FICA FICA
Federal Insurance Contributions Act
Noun 1. FICA - a tax on employees and employers that is used to fund the Social Security system
income tax - a personal tax levied on annual income
), 22 (RRTA RRTA Railroad Retirement Tax Act (IRS; similar to Social Security) ) and 23 (FUTA FUTA Federal Unemployment Tax Act (US) ) of the Code, and income taxes withheld under Chapter 24.
FROM WALTER GOLDBERG, WASHINGTON, DC