Estimated Taxes

 

Each quarterly estimated tax payment required is 25% of the lesser of
100% of the prior year’s tax, provided the tax liability existed and preceding tax year was 12 months (not for corporations with taxable income ≥ $1 million),
100% of the current year’s tax, or
100% of the annualized income (for corporations with uneven income).
The definition of tax for this purpose is found in Sec. 6655(f). This definition includes the alternative minimum tax.
An extension of time to file the tax return does not provide an extension of time to pay the tax liability without incurring interest and/or penalty.
Under Sec. 6655(d), the minimum installment is 25% of the required annual payment (the lesser of 100% of current tax or 100% of preceding year’s tax).
Paying 100% of the prior years tax is not an option for a large corporation. A large corporation is one with taxable income of $1 million or more during any 3 preceding years. Hence,  Large corporations are not able to avoid underpaying their taxes by relying on the 100% of the tax shown on the return for the preceding year exception.
For the first quarter, estimated payments of large companies (taxable income greater than $1 million) should be 25% of the lesser of 100% of the current year’s tax or 100% of the prior year’s tax.  Estimated payments of large companies (taxable income greater than $1 million) should be 25% of the current year’s tax for the second, third, and fourth quarter.
Posted in Us Income Tax and tagged .