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USC Title 26 enacted through 2008

§ 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 required installments:The due date is:
1stApril 15
2ndJune 15
3rdSeptember 15
4thJanuary 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).
 
(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 required installments:The due date is:
1stJune 15
2ndSeptember 15
3rdJanuary 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.








Tax Code (Internal Revenue Code) Section Index


U.S. GAAP by Codification Topic
 
105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold


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Tax Code (Internal Revenue Code) Section Index




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