Estimated tax

Estimated tax Estimated tax 204.1 Corporations; additions to tax for underpayment. In determining the applicability of the exception provided by section 6655(d)(3), to the imposition of an addition to tax for underpayment of estimated income tax by a corporation, the entire amount of a net operating loss carryover should be deducted from the income for the appropriate period prior to annualization of the income for such period. §1.6655–2. (Sec. 6655, ’86 Code.) Rev. Rul. 67-93, 1967-1 C.B. 366. 204.2 Corporations; additions to tax for underpayment. A corporation that filed a consolidated return for the preceding taxable year but is unable to file a consolidated return for the current taxable year because of the sale of its interest in its subsidiary may rely on the exception under section 6655(d)(2) as provided by reg. 1.1502-5(b)(2) to determine the addition to the tax for under payment of estimated tax. §§1.1502–5, 1.6655–5. (Secs. 1502, 6655; ’86 Code.) Rev. Rul. 73-512, 1973–2 C.B. 413. 204.3 Corporations; additions to tax for underpayment. A calendar year corporation receiving most of its income during the last six months of the year and making only one installment payment of estimated tax, a timely fourth installment period payment equal to 25 percent of 80 percent of its ultimate tax liability for the year, has not underpaid the installment due for the fourth period within the meaning of section 6655. §§1.6154-1, 1.6655-2. (Secs. 6154, 6655; ’86 Code.) Rev. Rul. 76-563, 1976–2 C.B. 445. 204.4 Corporations; additions to tax for underpayment; amended return. A corporation’s amended return filed on or before the due date, including extensions, for filing of the corporation’s return for a taxable year is the corporation’s return for that taxable year for purposes of section 6655(b) and (d)(1). §§1.6655–1. (Sec. 6655, ’86 Code.) Rev. Rul. 78–256, 1978–1 C.B. 438. 204.5 Corporations; additions to tax for underpayment; recomputation of prior year’s investment credit. A corporation that in its preceding taxable year had no taxable income but paid tax from recomputing a prior year’s investment credit and incurs tax liability for the current year without making deposits for estimated tax is subject to the addition to tax for underpayment of estimated tax. §§1.47–1, 1.6154–1, 1.6655–2. (Secs. 47, 6154, 6655; ’86 Code.) Rev. Rul. 78-257, 1978–1 C.B. 440. 204.6 Corporations; annualized income; year-end dividend from DISC. A corporation using the same accounting period and method as its wholly owned DISC may compute estimated tax without taking into account the constructive dividend deemed to be received from the DISC on the last day of the corporation’s taxable year. §§1.995-2, 1.6655-2. (Secs. 995, 6655; ’86 Code.) Rev. Rul. 80-343, 1980–2 C.B. 374. 204.7 Corporations; credit offset from preceding year; addition to tax for underpayment. When an underpayment of estimated tax is satisfied by an overpayment applied from a previous year, the period of underpayment runs from the due date of the installment of estimated tax to the date the overpayment arose. Rev. Rul. 83-111 revoked. Rev. Rul. 77-475 reinstated as modified. §§1.6152-1, 1.6154-1, 1.6655-1, 301.6402-3. (Secs. 6152, 6254, 6402, 6655; ’86 Code.) Rev. Rul. 84-58, 1984-1 C.B. 254. 204.8 Corporations; first two consecutive consolidated return years. Members of an affiliated group may file either separate or consolidated declarations of estimated tax for the first two consecutive consolidated return years; thereafter, a consolidated declaration must be filed. However, in applying these provisions to taxable years ending on or before June 30, 1968, the term “declaration of estimated tax” should be “payments of estimated tax.’’ §1.1502–5. (Sec. 1502, ’86 Code.) Rev. Rul. 69-622, 1969-2 C.B. 169. 204.9 Corporations; penalty; change in accounting method. A penalty will be imposed if Estimated tax a corporation does not make estimated tax payments required by section 6154(a) while awaiting aproval of a change in accounting period. §§1.442-1, 1.6154-1, 1.6655-1. (Secs. 442, 6154, 6655; ’86 Code.) Rev. Rul. 81-259, 1981-2 C.B. 247. 204.10 Corporations; penalty for failure to pay. A company whose small business corporation election was terminated after the first day of the twelfth month of its taxable year is not liable for the addition to the tax for failure to pay estimated tax for that year. §§1.1371–1, 1.6154–1, 1.6655-1. (Secs. 1371, 6154, 6655; ’86 Code.) Rev. Rul. 73-25, 1973–1 C.B. 606. 204.11 Corporations; penalty for underpayment; annualized income; accrued taxes. The state property tax and franchise tax deducted in full on the lien date or the accrual date by a corporation under its method of accounting may be deducted in computing annualized taxable income for purposes of section 6655(d)(3); however, an accrual method taxpayer accruing real property taxes ratably under section 461 may only deduct the accrued ratable portion for the period for which taxable income is being annualized. §§1.461-1, 1.6655-2. (Secs. 461, 6655; ’86 Code.) Rev. Rul. 76-450, 1976-2 C.B. 444. 204.12 Corporations; penalty for underpayment; exception. The termination of the investment credit by section 49 constitutes a “change in rate” and such credit shown on the preceding year’s tax return may not be considered in determining whether a taxpayer qualifies for exception from the addition to tax for underpayment of estimated tax. §1.6655–2. (Sec. 6655, ’86 Code.) Rev. Rul. 72-91, 1972–1 C.B. 400. 204.17 Declarations; farming small business corporation shareholders. Under section 1366 of the Code, an individual shareholder’s pro-rata share of an S corporation’s gross income from farming or fishing is treated as gross income from farming or fishing for purposes of section 6654(i). Rev. Rul. 76-141 obsoleted. §1.6654-1. (Secs. 1366, 6654; ’86 Code.) Rev. Rul. 87-121, 1987-2 C.B. 217. 204.18 Declarations; one spouse as agent for other; authorization. Form 936, AuthorizationJoint Returns or Declarations, may be used to authorize one spouse to sign a joint return or declaration as agent for the other spouse. §§1.6012–1, 1.6013-1, 1.6015(b)-1. (Secs. 6012, 6013, 6015; ’86 Code.) Note: Form 936 has been replaced by form 2848D. Rev. Rul. 65-248, 1965-2 C.B. 432. 204.19 Declarations; one spouse as agent for other; oral authorization. One spouse may on oral authorization act as agent for the other spouse who is physically unable to sign a joint return, declaration, or formal authorization. §§1.6012-1, 1.6013-1, 1.6015(b)-1, 1.6061-1. (Secs. 6012, 6013, 6015, 6061; ’86 Code.) Rev. Rul. 70-216, 1970-1 C.B. 265. 204.20 Declarations; taxicab drivers; cars purchased from taxi association. Taxicab drivers operating vehicles purchased from a taxicab association under conditional sales agreements requiring specified daily payments but giving the association no right to control their operations are not employees of the association. However, earnings therefrom should be considered for estimated tax declarations. S.S.T. 241 superseded. §§1.1402(a)-1, 1.6015(a)-1. (Secs. 1402, 6015; ’86 Code.) Rev. Rul. 71-571, 1971-2 C.B. 347. Rev. Rul. 63-26 modified. §1.6073-1. (Sec. 6073, ’86 Code.) Rev. Rul. 80-366, 1980-2 C.B. 343. 204.25 Overpayment; additional tax determined. An overpayment shown on a return that was applied at the taxpayer’s election to estimated tax for the succeeding year cannot be offset against any additional tax subsequently determined for the year of the overpayment. Rev. Rul. 55-448 amplified. §301.6402-3. (Sec. 6402, ’86 Code.) Rev. Rul. 77-339, 1977-2 C.B. 475. 204.26 Overpayment; allocation between spouses. The filing by divorced taxpayers of separate returns, dividing an overpayment on their previous year’ s joint return that was treated as a credit against tax for the current year, is evidence that the parties reached an agreement on the allo cation of the overpayment, and, in the absence of evidence to the contrary, the allocation provisions of reg. 1.6015(b)-1(b) will not apply. §§1.6015(b)-1, 301.6315-1. (Secs. 6015, 6315; ’86 Code.) Rev. Rul. 76-140, 1976–1 C.B. 376. 204.27 Overpayment; credit offset against interest assessed. An overpayment shown on a corporation’s income tax return, which it elected to credit to its estimated tax liability for the succeeding year, may be reduced under section 6402(a) by interest assessed on the difference between the taxes shown on its Form 7004 and the taxes shown on its Form 1120. §301.6402–3. (Sec. 6402, ’86 Code.) Rev. Rul. 73-458, 1973–2 C.B. 409. 204.28 Overpayment; unlimited charitable deduction. An overpayment of tax which is claimed and allowed as a credit against the estimated tax for the succeeding year constitutes income tax paid in the succeeding year, for thepurpose of applying the unlimited charitable contributions deduction, to the extent that estimated tax payments during the succeeding year do not exceed the tax liability. §39.120-1. (Sec. 120, ’39 Code; Sec. 170, ’86 Code.) Rev. Rul. 55–255, 1955–1 C.B. 374. 204.29 Overpayment; when refundable. Payments of estimated tax for a particular taxable year may not be refunded prior to the close of such taxable year, even though an amended declaration filed by the taxpayer after such payments were made may show an estimated tax liability of zero. §39.322-1. (Sec. 322, ’39 Code; Sec. 6511, ’86 Code.) Rev. Rul. 54-149, 1954-1 C.B. 159. 204.30 Penalties; effect of relief provisions. Additions to tax for failure to file a declaration of estimated tax and make payments thereon is not disturbed by the application of a relief provision such as a net operating loss carryback. §39.294-1. (Sec. 294, ’39 Code; Sec. 6654, ’86 Code.) Rev. Rul. 55-29, 1955-1 C.B. 413. 204.31 Penalties; exception; investment credit limitation recomputed. The increase in the limitation for investment credit imposed by section 46(a)(3)(B) is a change in rates within the meaning of reg. 1.6655–2(b)(2)(ii). A taxpayer may recompute the limitation imposed on the investment credit for purposes of reducing the tax liability and the amount of the estimated tax payment needed to avoid the estimated tax penalty. §§1.38-1, 1.46-1, 1.6654-2, 1.6655-2. (Secs. 38, 46, 6654, 6655; ’86 Code.) Rev. Rul. 82–65, 1982-1 C.B. 213. 204.32 Penalties; failure to file and underestimation. The additions to tax under the 1939 Code for failure to file a declaration of estimated income tax and for substantial underestimation of such tax may not be imposed concurrently. A failure to file is not the same as a declaration estimat- 204.13 Corporations; subsidiary merged with parent. Where a subsidiary corporation is merged into its parent, the parent need consider 204.21 Declarations; taxicab drivers; leasing their only the tax shown on its own return for the pre- cabs or services. Taxicab drivers who leasefor a ceding year in basing its declaration of estimated vehicles from a taxicab company in return tax for the current year on the exception provided percentage of the fares that they collect are in section 6655(d)(1). §1.6655–2. (Sec. 6655, ’86 employees of the company. Owners and drivers who lease the services of the company and in the Code.) case of nonowner drivers, the vehicles as well, for Rev. Rul. 68–9, 1968-1 C.B. 566. a fixed amount at regular intervals are not employees of the company. Their earnings, how204.14 Declarations; cotton ginners and oys- ever, should be considered for purposes of self ter planters. Cotton ginners and oyster planters employment tax and estimated tax declarations. are not considered farmers within the meaning of Mim. 6652 and Rev. Rul. 66–267 superseded. section 60(a); consequently, they are not entitled §§1.1402(a)-1, 1.6015(a)-1. (Secs. 1402, 6015; to the benefits of such section and must file their ’86 Code.) declarations of estimated tax in accordance with Rev. Rul. 71-572, 1971-2 C.B. 347. section 58(d) of the ’39 Code. §§39.58(d)–1, 39.60-1. (Secs. 58(d), 60, ’39 Code; Sec. 6015, 204.22 Estates and trusts; underpayments. ’86 Code.) Taxpayers are informed of the procedure to be Rev. Rul. 54-357, 1954-2 C.B. 125. used to obtain a waiver of the addition to tax for 204.15 Declarations; farm employees. Wages underpay merits of estimated tax by estates and paid to a farm employee do not constitute gross trusts. Notice 88-15, 1988-1 C.B. 482. income from farming for purposes of section 6073(b) and the employee is subject to the requirements for the filing of a declaration of estimated 204.23 Farmers; gains from sales of livestock, income tax under section 6015(a) within the time farm lands, or depreciable property. Gains from the sale of livestock used in the trade or business prescribed 6073(a). §§1.6015(f)-1, 1.6073-1. (Secs. 6015, 6073; ’86 of farming and held for draft, breeding or dairy purposes must be included in estimated gross Code.) income from farming without regard to any deducRev. Rul. 65-280, 1965-2 C.B. 433. tion allowable under section 1202. Estimated 204.16 Declarations; farming; custom grain gross income from farming does not include gains harvester. Income derived by an individual from from the sale of farm lands and depreciable farm Modified by Rev. Rul. custom grain harvesting and hauling operations on property. 80-366. §§1.1202-1, 1.6073-1. (Secs. 1202, 6073; various farms with personnel and machines furnished by the individual does not qualify as ’86 Code.) Rev. Rul. 63-26, 1963-1 C.B. 295. income from farming under section 6073(b) for purposes of filing a declaration of estimated tax and the individual must file the declaration within 204.24 Farming trust beneficiary. Income to a the time prescribed by section 6073(a). beneficiary from a trust that is engaged solely in the business of farming is considered to be gross §1.6073-1. (Sec. 6073, ’86 Code.) income from farming for estimated tax purposes, Rev. Rul. 77-105, 1977-1 C.B. 374. Estimated tax ing the tax to be zero. §29.294-1. (Sec. 294(d), ’39 Code; Sec. 6654, ’86 Code.) Acker, 361 U.S. 87, Ct. D. 1841, 1959-2 C.B. 491. 204.33 Penalties; failure to file or pay installments. Application of the addition to tax for failure to file timely declarations of estimated tax and to make timely payments of required installments is explained, where the taxpayer files his final return and pays full amount of tax by January 15 of the following year. §§39.58(d)–1, 39.294–1. (Secs. 58(d), 294, ’39 Code; Secs. 6015, 6654, ’86 Code.) Rev. Rul. 292, 1953-2 C.B. 82. 204.34 Penalties; failure to file or pay installments. The additions to the tax, with respect to a failure to tile a declaration of estimated tax or a failure to pay installments of estimated tax declared, cease to accrue on the date the tax is paid or the date prescribed for payment of the tax whichever is earlier. The Carl Stephan decision followed. §39.294–1. (Sec. 294(d), ’39 Code; Sec. 6654, ’86 Code.) Rev. Rul. 55-673, 1955-2 C.B. 596. 204.35 Penalties; farm waiver. The Service will waive any estimated tax penalty for farmers who did not receive 1987 information returns from the U.S. Department of Agriculture by February 15, 1988. Notice 88-28, 1988-1 C.B. 496. the basis for the computation. Rev. Rul. 64–138 revoked. §1.6655–1. (Sec. 6655, ’86 Code.) Rev. Rul. 86-58, 1986-1 C.B. 365. 204.41 Penalties; underpayment; exceptions; investment credit.An investment credit may not be annualized for purposes of determining the applicability of the exceptions to the addition to tax for underpayment of estimated tax provided by sections 6654(d)(2) and 6655(d)(3). §1.6655–2. (Sec. 6655, ’86 Code.) Rev. Rul. 79-179, 1979-1 C.B. 436. 204.42 Penalties; underpayment; exceptions; preceding year short period. In determining the applicability of the exception to the addition to tax for underpayment of estimated tax provided by section 6655(d)(2), a foreign tax credit shown on a corporation’s preceding year short period return is computed on the separately annualized amount of foreign income for that year. An investment credit is computed on the amount of qualified property acquired or constructed during the short period; the limitation on the credit is based on the annualized tax for the short period. §§1.443–1, 1.6154-1, 1.6655-2 (Secs. 443, 6154, 6655; ’86 Code.) Rev. Rul. 78-219, 1978-1 C.B. 439. 204.48 Penalties; underpayment; increased standard deduction; 1971. The increased standard deduction for 1971 may not be used for purposes of the exception to the addition to the tax for underpayment of estimated tax for 1971 provided by section 6654(d)(4). §1.6654-2. (Sec. 6654, ’86 Code.) Rev. Rul. 72-210, 1972-1 C.B. 400. 204.49 Penalties; underpayment; joint return following separate returns. The tax shown on a joint return filed after the due date, to replace separate returns filed before the due date, is the basis for computing the addition to tax for underpayment of estimated tax. §§1.6013–2, 1.6654-1. (Secs. 6013, 6654; ’86 Code.) Rev. Rul. 80-355, 1980-2 C.B. 374. 204.50 Penalties; underpayment; no income for prior year; corporation. The addition to the tax for underpayment of estimated tax will not be asserted against a corporate taxpayer for failure to pay any estimated tax for the current year or for failure to continue making any installments thereof when its prior year’s return reflects no taxable income. §1.6655–2. (Sec. 6655, ’86 Code.) Rev. Rul. 60-200, 1960-1 C.B. 645. 204.51 Penalties; underpayment; no income for prior year; individual. The addition to the tax 204.43 Penalties; underpayment; exceptions; for underpayment of estimated tax will not be use of net operating loss of small business cor- asserted against an individual taxpayer for failure poration. A shareholder of an electing small busi- to pay any estimated tax for the current year when ness corporation cannot use any portion of the cor- his prior year’s return reflects no taxable income poration’s NOL for the taxable year in after giving effect to the taxpayer’s status with 204.36 Penalties; farmers; joint return with determining the applicability of the exceptions to respect to personal exemptions for the current taxnonfarm income. The addition to tax for under- the penalty for the underpayment of the sharehold- able year. §1.6654–2. (Sec. 6654, ’86 Code.) payment of estimated tax imposed by section er’s installment of estimated tax due before the Rev. Rul. 58-369, 1958-2 C.B. 894. 6654(a) will apply to a joint return, filed March 1 end of the corporation’s taxable year. However, for the preceding calendar year for which no esti- the shareholder may use the entire portion of the 204.52 Penalties; underpayment; reconmated tax had been paid, by a husband who allocable loss in order to determine the applicabil- structed income. A taxpayer was not liable for derives all of his income from farming and his ity of the exceptions in the case of an installment penalties for underestimation of tax where his estispouse whose income is from nonfarm sources due after the corporation’s taxable year ends. mate for each year was greater than the tax shown and is 35% of their aggregate gross income. §§1.1374-1, 1.6015(a)-1, 1.6153-1, 1.6654-2. on the return for each preceding taxable year, even though the tax based on his reconstructed income §§1.6013-4, 1.6015(f)-1, 1.6073-1, 1.6654-1. (Secs. 1374, 6015, 6153, 6654; ’86 Code.) for each year was substantially greater than the tax (Secs. 6013, 6015, 6073, 6654; ’86 Code.) Rev. Rul. 81-144, 1981-1 C.B. 588. shown on the returns. §39.294–1. (Sec. 294, ’39 Rev. Rul. 75-356, 1975-2 C.B. 497. Code; Sec. 6654, ’86 Code.) 204.44 Penalties; underpayment; exceptions; Schwarzkopf, 246 F. 2d 731, Ct. D. 1822, 204.37 Penalties; underestimation; stock1958-1 C.B. 508. holder of small business corporation. In com- farmers and fishermen. For purposes of determining if an exception to the underpayment penputing estimated tax for the current taxable year, alty for estimated tax applies, an individual tax204.53 Penalties; zero estimation. Taxpayer a stockholder omission of dividends and his pro rata share of undistributed taxable income of a payer may use the appropriate tax table or tax rate who filed an estimated tax declaration of zero is small business corporation will not excuse his schedule for the taxpayer’s status, whichever is not liable for additions to tax for failure to file a liability for additions to tax even though informa- more advantageous. §§1.6153–1, 1.6654–2. (Sec. declaration merely because the underestimation was deliberate. (Sec. 294, ’39 Code; Sec. 6654, tion as to the amounts was not then available. 601.105, S.P.R.; Secs. 6153, 6654, ’86 Code.) Rev. Proc. 83-79, 1983-2 C.B. 597. ’86 Code.) §1.6654-1. (Sec. 6654, ’86 Code.) Anthony Delsanter, 28 T.C. 845, Acq., 1958-2 Rev. Rul. 62-202, 1962-2 C.B. 344. 204.45 Penalties; underpayment; exemptions C.B. 5. 204.38 Penalties; underpayment; amended and rates; 1970. A taxpayer who made timely 204.54 Refunds and credits; limitation return; individual. To be considered the return installment payments is not subject to a penalty if period; filing extension. A creditor refund may for the year for purposes of computing the penalty he computed his 1970 estimated tax using 1970 be allowed with respect to estimated tax payments for underpayment of estimated tax under section exemptions and rates but otherwise on the basis of made by an individual who filed a return and paid 6654(b), an amended return must be filed by the facts on his 1969 return and the law applicable to an additional amount during an extension period 1969. §1.6654-2. (Sec. 6654, ’86 Code.) due date of the original return. §1.6654-1. (Sec. and who filed an amended return three years later. Rev. Rul. 71-226, 1971-1 C.B. 406. 6654, ’86 Code.) However, if the return had been filed and the addiRev. Rul. 83-36, 1983-1 C.B. 358. 204.46 Penalties; underpayment; facts tional amount paid after the extension period, a credit or refund may be allowed only with respect 204.39 Penalties; underpayment; beneficiary shown on return; corporations. A net operating to the additional amount paid. §301.6511(b)–1. of trust. Amounts that the beneficiary of a trust is loss carryover and an investment credit carry over (Sec. 6511, ’86 Code.) deemed under section 663(b) to have received dur- are facts shown on the return of the corporation for Rev. Rul. 78-343, 1978-2 C.B. 326. ing the preceding taxable year need not be con- the preceding taxable year for purposes of determining any addition to the tax for underpayment 204.55 Small business corporations; addisidered in determining the applicability of the exceptions to the addition to tax for underpayment of an estimated tax installment. §1.6655–2. (Sec. tions for underpayment. The exception to the of estimated tax provided by section 6654(d)(2) 6655, ’86 Code.) addition to the tax for underpayment of estimated Rev. Rul. 69–308, 1969-1 C.B. 304. and (d)(3) if the trust and the beneficiaries are on tax may be applied in determining whether a corthe same taxable year. §§1.663(b)–1, 1.6654-2. poration is subject to an addition to tax for under204.47 Penalties; underpayment; facts payment of the tax subsequent to the year it was an (Secs. 663, 6654; ’86 Code.) shown on return; individuals. The computation electing small business corporation. §§1.1373–1, Rev. Rul. 78-158, 1978-1 C.B. 437. of income under the income averaging provisions 1.6012-2, 1.6655-2. (Secs. 1373, 6012, 6655; ’86 204.40 Penalties; underpayment; corpora- of the Code is a fact shown on the taxpayer’s return Code.) tion; amended return.In applying the exception for the preceding taxable year for purposes of Rev. Rul. 72-388, 1972-2 C.B. 643. to the addition to tax for underpayment of esti- determining any addition to the tax for underpaymated tax, it is the tax shown on the original tax ment of an estimated tax installment. §1.6654-2. 204.56 Underpayment; additional income. When a taxpayer receives income not included in return and not the tax shown on an amended return (Sec. 6654, ’86 Code.) filed after the due date of the original return that is Rev. Rul. 69-307 .1969-1 C.B. 304. his declaration of estimated tax, no addition to the Estimated tax tax for underpayment of an installment will be made if his return for the prior year covers a taxable period of 12 months and if the total of all payments of estimated tax, made on or before the last date prescribed for the payment of the installment, equals or exceeds the amount which the taxpayer would have been required to pay on or before the installment date if his estimated tax were the tax shown on his return for the prior year. (Sec. 6654, ’86 Code.) Rev. Ru1. 57-185, 1957-1 C.B. 454. 204.57 Underpayments; penalties; corporations and individuals. No penalties will be imposed on underpayment of estimated tax existing during any period ending on or before the applicable date for filing 1986 calendar year returns to the extent the underpayment are attributable to changes made by the Tax Reform Act of 1986. §1.6655-1. (Sec. 6655, ’86 Code.) Rev. Rul. 86-136, 1986-2 C.B. 209.