A return must be filed for taxable year 2010 by every individual whose gross income equals or exceeds the following limits:
(1) Married persons filing jointly--$18,700 (if one spouse is blind or elderly--$19,800; if both spouses are blind or elderly--$20,900; if both spouses are blind and elderly--$23,100). (1) A married taxpayer with gross income of $3,650 or more in 2010 must file a return if he and his spouse are living in different households at the end of the taxable year.
(2) Surviving spouse (see Q 1434)--$15,050 (if elderly or blind--$16,150; if elderly and blind-$17,250). (2)
(3) Head-of-household (see Q 1435)-$12,050 (if blind or elderly-$13,450; if elderly and blind-$14,850).
(4) Single persons-$9,350 (if blind or elderly-$10,750; if blind and elderly-$12,150).
(5) Married filing separately--if neither spouse itemizes, a return must be filed if gross income equals or exceeds $9,350 in 2010 (if blind or elderly--$10,450; if blind and elderly--$11,550). (3) If either spouse itemizes--$3,650.
(6) Dependents--every individual who may be claimed as a dependent of another must file a return for 2010 if he has unearned income in excess of $950 (plus any additional standard deduction if the individual is blind or elderly) or total gross income that exceeds the sum of any additional standard deduction if the individual is blind or elderly plus the greater of (a) $950 or (b) the lesser of (i) $300 plus earned income, or (ii) $5,700.
(7) Taxpayers who are non-resident aliens or who are filing a short year return because of a change in their annual accounting period--$3,650. (4)
Certain parents whose children are required to file a return may be permitted to include the child's income over $1,900 on their own return, thus avoiding the necessity of the child filing a return. See Q 1411.
A taxpayer with self-employment income must file a return if net self-employment income is $400 or more. See Q 1442.
1401. Who must pay the estimated tax and what penalties are imposed for underpayment of the tax?
Taxpayers are generally required to pay estimated tax if failure to pay would result in an underpayment (see below) of federal income tax. (1) Taxpayers must include the alternative minimum tax and estimated self-employment tax in their calculation of estimated tax (see Q 1440 and Q 1442, respectively). (2) An underpayment is the amount by which a required installment exceeds the amount, if any, paid on or before the due date of that installment (due dates are April 15, June 15, September 15 and January 15 of the following year). (3) The required amount for each installment is 25% of the required annual payment. (4)
Generally, the "required annual payment" is the lower of (a) 90% of the tax shown on the return for the taxable year (or, if no return is filed, 90% of the tax for the year), or (b) 100% of the tax shown on the return for the preceding year (but only if the preceding taxable year consisted of 12 months and a return was filed for that year). (5) However, for an individual whose adjusted gross income for the previous tax year exceeded $150,000 ($75,000 in the case of married individuals filing separately), the required annual payment is the lesser of (a) 90% of the current year's tax, as described above, or (b) the applicable percentage of the tax shown on the return for the preceding year. The applicable percentage for tax years beginning 2002 or later is 110%. (6) ARRA 2009 provided that certain individuals could meet the estimated tax payment requirements for 2009 by paying 90% of the prior year's taxes. Such individual's adjusted gross income for the preceding year must be less than $500,000 and the individual must certify that more than 50% of the gross income shown on the return for the preceding year was income from a small business (average number of employees less than 500). (7)
As an alternative to the required annual payment methods in the preceding paragraph, taxpayers can pay estimated tax by paying a specified percentage of the current year's tax, computed by annualizing the taxable income for the months in the taxable year ending before the month in which the installment falls due. The percentages that apply under the annualization method are: 22.5% (1st quarter), 45% (2nd quarter), 67.5% (3rd quarter), and 90% (4th quarter). (8)
However, regardless of the method used to calculate estimated taxes, there is no interest penalty imposed if: (1) the tax shown on the return for the taxable year (or, if no return is filed, the tax) after reduction for withholdings, is less than $1,000; or (2) the taxpayer owed no tax for the preceding year (a taxable year consisting of 12 months) and the taxpayer was a U.S. citizen or resident for the entire taxable year. (9) Otherwise, underpayment results in imposition of an interest penalty, compounded daily, at an annual rate that is adjusted quarterly so as to be three percentage points over the short-term applicable federal rate. (10) (See Q 1409).
If the taxpayer elects to apply an overpayment to the succeeding year's estimated taxes, the overpayment is applied to unpaid installments of estimated tax due on or after the date(s) the overpayment arose in the order in which they are required to be paid to avoid an interest penalty for failure to pay estimated income tax with respect to such tax year. (11) For application of the estimated tax to trusts and estates, see Q 1449.
(1.) IRC Sec. 63(c).
(2.) IRC Sec. 63(c).
(3.) IRC Sec. 63(c).
(4.) IRC Secs. 6012(a), 63(c), 151; Rev. Proc. 2009-50, 2009-45 IRB 617.
(1.) IRC Sec. 6654.
(2.) IRC Sec. 6654(d)(2)(B)(i).
(3.) IRC Secs. 6654(b), 6654(c).
(4.) IRC Sec. 6654(d)(1)(A).
(5.) IRC Sec. 6654(d)(1)(B).
(6.) IRC Sec. 6654(d)(1)(C).
(7.) IRC Sec. 6654(d)(1)(D).
(8.) IRC Sec. 6654(d)(2).
(9.) IRC Sec. 6654(e).
(10.) IRC Sec. 6621(a)(2).
(11.) Rev. Rul. 99-40, 1999-2 CB 441.