§ 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—
(b)
Amount of underpayment; period of underpayment
For purposes of subsection (a)—
(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
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”.
(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”.
(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)—
(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—
(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—
(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—
(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—
(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
(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.
(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—
(j)
Special rules for nonresident aliens
(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: |
|---|---|
| 1st | June 15 |
| 2nd | September 15 |
| 3rd | January 15 of the following taxable year. |
(k)
Fiscal years and short years
(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—
(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.
(m)
Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.