26 U.S.C. § 6654 : US Code - Section 6654: Failure by individual to pay estimated income tax

Search 26 U.S.C. § 6654 : US Code - Section 6654: Failure by individual to pay estimated income tax

    (a) Addition to the tax
      Except as otherwise provided in this section, in the case of any
    underpayment of estimated tax by an individual, there shall be
    added to the tax under chapter 1 and the tax under chapter 2 for
    the taxable year an amount determined by applying - 
        (1) the underpayment rate established under section 6621,
        (2) to the amount of the underpayment,
        (3) for the period of the underpayment.
    (b) Amount of underpayment; period of underpayment
      For purposes of subsection (a) - 
      (1) Amount
        The amount of the underpayment shall be the excess of - 
          (A) the required installment, over
          (B) the amount (if any) of the installment paid on or before
        the due date for the installment.
      (2) Period of underpayment
        The period of the underpayment shall run from the due date for
      the installment to whichever of the following dates is the
      earlier - 
          (A) the 15th day of the 4th month following the close of the
        taxable year, or
          (B) with respect to any portion of the underpayment, the date
        on which such portion is paid.
      (3) Order of crediting payments
        For purposes of paragraph (2)(B), a payment of estimated tax
      shall be credited against unpaid required installments in the
      order in which such installments are required to be paid.
    (c) Number of required installments; due dates
      For purposes of this section - 
      (1) Payable in 4 installments
        There shall be 4 required installments for each taxable year.
      (2) Time for payment of installments


         In the case of the following              The due date is:     
            required installments:                                      
    --------------------------------------------------------------------
      1st                                    April 15                   
      2nd                                    June 15                    
      3rd                                    September 15               
      4th                                    January 15 of the          
                                              following taxable year.   
    --------------------------------------------------------------------

    (d) Amount of required installments
      For purposes of this section - 
      (1) Amount
        (A) In general
          Except as provided in paragraph (2), the amount of any
        required installment shall be 25 percent of the required annual
        payment.
        (B) Required annual payment
          For purposes of subparagraph (A), the term "required annual
        payment" means the lesser of - 
            (i) 90 percent of the tax shown on the return for the
          taxable year (or, if no return is filed, 90 percent of the
          tax for such year), or
            (ii) 100 percent of the tax shown on the return of the
          individual for the preceding taxable year.

        Clause (ii) shall not apply if the preceding taxable year was
        not a taxable year of 12 months or if the individual did not
        file a return for such preceding taxable year.
        (C) Limitation on use of preceding year's tax
          (i) In general
            If the adjusted gross income shown on the return of the
          individual for the preceding taxable year beginning in any
          calendar year exceeds $150,000, clause (ii) of subparagraph
          (B) shall be applied by substituting the applicable
          percentage for "100 percent". For purposes of the preceding
          sentence, the applicable percentage shall be determined in
          accordance with the following table:
                                                                   The
    If the preceding taxable                                applicable
     year begins in:                                    percentage is:
      1998                                                       105  
      1999                                                     108.6  
      2000                                                       110  
      2001                                                       112  
      2002 or thereafter                                          110.

          This clause shall not apply in the case of a preceding
          taxable year beginning in calendar year 1997.
          (ii) Separate returns
            In the case of a married individual (within the meaning of
          section 7703) who files a separate return for the taxable
          year for which the amount of the installment is being
          determined, clause (i) shall be applied by substituting
          "$75,000" for "$150,000".
          (iii) Special rule
            In the case of an estate or trust, adjusted gross income
          shall be determined as provided in section 67(e).
        (D) Special rule for 2009
          (i) In general
            Notwithstanding subparagraph (C), in the case of any
          taxable year beginning in 2009, clause (ii) of subparagraph
          (B) shall be applied to any qualified individual by
          substituting "90 percent" for "100 percent".
          (ii) Qualified individual
            For purposes of this subparagraph, the term "qualified
          individual" means any individual if - 
              (I) the adjusted gross income shown on the return of such
            individual for the preceding taxable year is less than
            $500,000, and
              (II) such individual certifies that more than 50 percent
            of the gross income shown on the return of such individual
            for the preceding taxable year was income from a small
            business.

          A certification under subclause (II) shall be in such form
          and manner and filed at such time as the Secretary may by
          regulations prescribe.
          (iii) Income from a small business
            For purposes of clause (ii), income from a small business
          means, with respect to any individual, income from a trade or
          business the average number of employees of which was less
          than 500 employees for the calendar year ending with or
          within the preceding taxable year of the individual.
          (iv) Separate returns
            In the case of a married individual (within the meaning of
          section 7703) who files a separate return for the taxable
          year for which the amount of the installment is being
          determined, clause (ii)(I) shall be applied by substituting
          "$250,000" for "$500,000".
          (v) Estates and trusts
            In the case of an estate or trust, adjusted gross income
          shall be determined as provided in section 67(e).
      (2) Lower required installment where annualized income
        installment is less than amount determined under paragraph (1)
        (A) In general
          In the case of any required installment, if the individual
        establishes that the annualized income installment is less than
        the amount determined under paragraph (1) - 
            (i) the amount of such required installment shall be the
          annualized income installment, and
            (ii) any reduction in a required installment resulting from
          the application of this subparagraph shall be recaptured by
          increasing the amount of the next required installment
          determined under paragraph (1) by the amount of such
          reduction (and by increasing subsequent required installments
          to the extent that the reduction has not previously been
          recaptured under this clause).
        (B) Determination of annualized income installment
          In the case of any required installment, the annualized
        income installment is the excess (if any) of - 
            (i) an amount equal to the applicable percentage of the tax
          for the taxable year computed by placing on an annualized
          basis the taxable income, alternative minimum taxable income,
          and adjusted self-employment income for months in the taxable
          year ending before the due date for the installment, over
            (ii) the aggregate amount of any prior required
          installments for the taxable year.
        (C) Special rules
          For purposes of this paragraph - 
          (i) Annualization
            The taxable income, alternative minimum taxable income, and
          adjusted self-employment income shall be placed on an
          annualized basis under regulations prescribed by the
          Secretary.
          (ii) Applicable percentage
    In the case of the following                          The applicable
    required installments:                                percentage is:
      1st                                                       22.5  
      2nd                                                         45  
      3rd                                                       67.5  
      4th                                                          90.
          (iii) Adjusted self-employment income
            The term "adjusted self-employment income" means self-
          employment income (as defined in section 1402(b)); except
          that section 1402(b) shall be applied by placing wages
          (within the meaning of section 1402(b)) for months in the
          taxable year ending before the due date for the installment
          on an annualized basis consistent with clause (i).
        (D) Treatment of subpart F and section 936 income
          (i) In general
            Any amounts required to be included in gross income under
          section 936(h) or 951(a) (and credits properly allocable
          thereto) shall be taken into account in computing any
          annualized income installment under subparagraph (B) in a
          manner similar to the manner under which partnership income
          inclusions (and credits properly allocable thereto) are taken
          into account.
          (ii) Prior year safe harbor
            If a taxpayer elects to have this clause apply to any
          taxable year - 
              (I) clause (i) shall not apply, and
              (II) for purposes of computing any annualized income
            installment for such taxable year, the taxpayer shall be
            treated as having received ratably during such taxable year
            items of income and credit described in clause (i) in an
            amount equal to the amount of such items shown on the
            return of the taxpayer for the preceding taxable year (the
            second preceding taxable year in the case of the first and
            second required installments for such taxable year).
    (e) Exceptions
      (1) Where tax is small amount
        No addition to tax shall be imposed under subsection (a) for
      any taxable year if the tax shown on the return for such taxable
      year (or, if no return is filed, the tax), reduced by the credit
      allowable under section 31, is less than $1,000.
      (2) Where no tax liability for preceding taxable year
        No addition to tax shall be imposed under subsection (a) for
      any taxable year if - 
          (A) the preceding taxable year was a taxable year of 12
        months,
          (B) the individual did not have any liability for tax for the
        preceding taxable year, and
          (C) the individual was a citizen or resident of the United
        States throughout the preceding taxable year.
      (3) Waiver in certain cases
        (A) In general
          No addition to tax shall be imposed under subsection (a) with
        respect to any underpayment to the extent the Secretary
        determines that by reason of casualty, disaster, or other
        unusual circumstances the imposition of such addition to tax
        would be against equity and good conscience.
        (B) Newly retired or disabled individuals
          No addition to tax shall be imposed under subsection (a) with
        respect to any underpayment if the Secretary determines that - 
            (i) the taxpayer - 
              (I) retired after having attained age 62, or
              (II) became disabled,

          in the taxable year for which estimated payments were
          required to be made or in the taxable year preceding such
          taxable year, and
            (ii) such underpayment was due to reasonable cause and not
          to willful neglect.
    (f) Tax computed after application of credits against tax
      For purposes of this section, the term "tax" means - 
        (1) the tax imposed by chapter 1 (other than any increase in
      such tax by reason of section 143(m)), plus
        (2) the tax imposed by chapter 2, minus
        (3) the credits against tax provided by part IV of subchapter A
      of chapter 1, other than the credit against tax provided by
      section 31 (relating to tax withheld on wages).
    (g) Application of section in case of tax withheld on wages
      (1) In general
        For purposes of applying this section, the amount of the credit
      allowed under section 31 for the taxable year shall be deemed a
      payment of estimated tax, and an equal part of such amount shall
      be deemed paid on each due date for such taxable year, unless the
      taxpayer establishes the dates on which all amounts were actually
      withheld, in which case the amounts so withheld shall be deemed
      payments of estimated tax on the dates on which such amounts were
      actually withheld.
      (2) Separate application
        The taxpayer may apply paragraph (1) separately with respect to
      - 
          (A) wage withholding, and
          (B) all other amounts withheld for which credit is allowed
        under section 31.
    (h) Special rule where return filed on or before January 31
      If, on or before January 31 of the following taxable year, the
    taxpayer files a return for the taxable year and pays in full the
    amount computed on the return as payable, then no addition to tax
    shall be imposed under subsection (a) with respect to any
    underpayment of the 4th required installment for the taxable year.
    (i) Special rules for farmers and fishermen
      For purposes of this section - 
      (1) In general
        If an individual is a farmer or fisherman for any taxable year -
       
          (A) there shall be only 1 required installment for the
        taxable year,
          (B) the due date for such installment shall be January 15 of
        the following taxable year,
          (C) the amount of such installment shall be equal to the
        required annual payment determined under subsection (d)(1)(B)
        by substituting "66 2/3  percent" for "90 percent" and without
        regard to subparagraph (C) of subsection (d)(1), and
          (D) subsection (h) shall be applied - 
            (i) by substituting "March 1" for "January 31", and
            (ii) by treating the required installment described in
          subparagraph (A) of this paragraph as the 4th required
          installment.
      (2) Farmer or fisherman defined
        An individual is a farmer or fisherman for any taxable year if -
       
          (A) the individual's gross income from farming or fishing
        (including oyster farming) for the taxable year is at least 66
        2/3  percent of the total gross income from all sources for the
        taxable year, or
          (B) such individual's gross income from farming or fishing
        (including oyster farming) shown on the return of the
        individual for the preceding taxable year is at least 66 2/3 
        percent of the total gross income from all sources shown on
        such return.
    (j) Special rules for nonresident aliens
      In the case of a nonresident alien described in section 6072(c):
      (1) Payable in 3 installments
        There shall be 3 required installments for the taxable year.
      (2) Time for payment of installments
        The due dates for required installments under this subsection
      shall be determined under the following table:


         In the case of the following              The due date is:     
            required installments:                                      
    --------------------------------------------------------------------
      1st                                    June 15                    
      2nd                                    September 15               
      3rd                                    January 15 of the          
                                              following taxable year.   
    --------------------------------------------------------------------

      (3) Amount of required installments
        (A) First required installment
          In the case of the first required installment, subsection (d)
        shall be applied by substituting "50 percent" for "25 percent"
        in subsection (d)(1)(A).
        (B) Determination of applicable percentage
          The applicable percentage for purposes of subsection (d)(2)
        shall be determined under the following table:

    In the case of the following                          The applicable
    required installments:                                percentage is:
      1st                                                         45  
      2nd                                                       67.5  
      3rd                                                          90.
    (k) Fiscal years and short years
      (1) Fiscal years
        In applying this section to a taxable year beginning on any
      date other than January 1, there shall be substituted, for the
      months specified in this section, the months which correspond
      thereto.
      (2) Short taxable year
        This section shall be applied to taxable years of less than 12
      months in accordance with regulations prescribed by the
      Secretary.
    (l) Estates and trusts
      (1) In general
        Except as otherwise provided in this subsection, this section
      shall apply to any estate or trust.
      (2) Exception for estates and certain trusts
        With respect to any taxable year ending before the date 2 years
      after the date of the decedent's death, this section shall not
      apply to - 
          (A) the estate of such decedent, or
          (B) any trust - 
            (i) all of which was treated (under subpart E of part I of
          subchapter J of chapter 1) as owned by the decedent, and
            (ii) to which the residue of the decedent's estate will
          pass under his will (or, if no will is admitted to probate,
          which is the trust primarily responsible for paying debts,
          taxes, and expenses of administration).
      (3) Exception for charitable trusts and private foundations
        This section shall not apply to any trust which is subject to
      the tax imposed by section 511 or which is a private foundation.
      (4) Special rule for annualizations
        In the case of any estate or trust to which this section
      applies, subsection (d)(2)(B)(i) shall be applied by substituting
      "ending before the date 1 month before the due date for the
      installment" for "ending before the due date for the
      installment".
    (m) Regulations
      The Secretary shall prescribe such regulations as may be
    necessary to carry out the purposes of this section.