Publication 225 |
2000 Tax Year |
Estimated Tax Payment & Return Due Dates
When you must pay estimated tax and file your tax return depend on
how much of your gross income comes from farming. Gross income is
discussed next. If you receive at least two-thirds of your total gross
income from farming in the current or prior year, special estimated
tax and return due dates apply to you. See the discussion under
Due Dates for Qualified Farmers, later.
Figure 2-A presents an overview of the special estimated tax
rules that apply to farmers.
Gross income is not the same as total income shown on line 22 of
Form 1040.
Gross Income
Your gross income is all income you receive in the form of money,
goods, property, and services that is not exempt from tax. On a joint
return, you must add your spouse's gross income to your gross income.
To decide whether two-thirds of your gross income for 2000 was from
farming, use as your gross income the total of the following
income (not loss) amounts from your tax return.
- Wages, salaries, tips, etc.
- Taxable interest.
- Ordinary dividends.
- Taxable refunds of state and local taxes.
- Alimony received.
- Gross business income from Schedule C (Form 1040), line
7.
- Gross business receipts from Schedule C-EZ (Form
1040), line 1.
- Capital gains from Form 1040, line 13, including gains from
Schedule D (Form 1040). Losses cannot be netted against gains.
- Gains on sales of business property from Form 4797 and shown
on Schedule D.
- Taxable IRA distributions, pensions, annuities, and social
security benefits.
- Gross rental income from Schedule E (Form 1040), line
3.
- Gross royalty income from Schedule E (Form 1040), line
4.
- Taxable net income from an estate or trust, Schedule E (Form
1040), line 36.
- Income from a REMIC reported on Schedule E (Form 1040), line
38.
- Gross farm rental income from Form 4835, line 7.
- Gross farm income from Schedule F (Form 1040), line
11.
- Your distributive share of gross income from a partnership
or limited liability company treated as a partnership from Schedule
K-1 (Form 1065).
- Your pro rata share of gross income from an S corporation
from Schedule K-1 (Form 1120S).
- Unemployment compensation as reported on Form
1099-G.
- Other income reported on Form 1040, line 21, not reported
with any of the items listed above.
Gross Income
From Farming
Gross income from farming includes the following.
- Gross farm income from Schedule F (Form 1040), line
11.
- Gross farm rental income from Form 4835, line 7.
- Gross farm income from Schedule E (Form 1040), Parts II and
III. See the instructions for line 41.
- Gains from the sale of livestock used for draft, breeding,
sport, or dairy purposes reported on Form 4797.
For more information about income from farming, see chapter 4.
Wages you receive as a farm employee are not farm income. This
includes wages you receive from a farm corporation even if you are a
stockholder in the corporation. Income you receive from contract grain
harvesting and hauling with workers and machines that you furnish is
also not farm income.
Percentage From Farming
Figure your gross income from all sources as shown earlier. Then
figure your gross income from farming. Divide your farm gross income
by your total gross income to determine the percentage of gross income
from farming.
Example 1.
James Smith had the following total gross income and farm gross
income in 2000.
Gross Income
|
Total |
Farm |
Taxable interest |
$43,000 |
Dividends |
500 |
Rental income (Sch E) |
1,500 |
Farm income (Sch F) |
75,000 |
$75,000 |
Gain (Form 4797) |
5,000 |
5,000 |
Total |
$125,000 |
$80,000 |
Schedule D showed gain from the sale of dairy cows carried over
from Form 4797 ($5,000) in addition to a loss from the sale of
corporate stock ($2,000). However, that loss is not netted against the
gain to figure Mr. Smith's total gross income or his gross farm
income. His gross farm income is 64% of his total gross income
($80,000 x $125,000 = .64). Therefore, based on his 2000
income, he does not qualify to use the special estimated tax payment
and return due dates for 2000, discussed next. However, he does
qualify if at least two-thirds of his 1999 gross income was from
farming.
Example 2.
Assume the same facts as in Example 1 except that Mr. Smith also
received gross farm rental income (Form 4835) of $15,000. This made
his total gross income $140,000 and his farm gross income $95,000. He
qualifies to use the special estimated tax payment and return due
dates, discussed next, since 67.9% (at least two-thirds) of his gross
income is from farming ($95,000 x $140,000 = .679).
Due Dates for
Qualified Farmers
If at least two-thirds of your gross income for 1999 or 2000 was
from farming, you are a qualified farmer and can choose either of the
following options for your 2000 tax.
- Make your required annual payment, discussed next, by
January 16, 2001, and file your Form 1040 by April 16, 2001.
- File your Form 1040 by March 1, 2001, and pay all the tax
due. You are not required to make the annual payment. If you pay all
the tax due, you will not be penalized for failure to pay estimated
tax.
Required annual payment.
If at least two-thirds of your gross income for 1999 or 2000 was
from farming, the required annual payment due January 16, 2001, is the
smaller of the following amounts.
- 66 2/3% (.6667) of your total tax for
2000.
- 100% of the total tax shown on your 1999 return. (The return
must cover all 12 months.)
2001 tax. If at least two-thirds of your gross income
for 2000 or 2001 is from farming, for your 2001 tax you can choose
either of the following options.
- Make your required annual payment by January 15, 2002, and
file your Form 1040 by April 15, 2002.
- File your Form 1040 by March 1, 2002, and pay all the tax
due.
Fiscal year farmers.
If you qualify to use these special rules but your tax year does
not start on January 1, you can file your return and pay the tax by
the first day of the 3rd month after the close of your tax year. Or
you can make your required annual payment within 15 days after the end
of your tax year. Then file your return and pay any balance due by the
15th day of the 4th month after the end of your tax year.
Due Dates for
Nonqualified Farmers
If less than two-thirds of your gross income for 1999 and 2000
was from farming, you cannot use these special estimated tax
payment and return due dates for your 2000 tax year. Instead, you
should have made quarterly estimated tax payments on April 17, June
15, and September 15, 2000, and on January 16, 2001. You must file
your return by April 16, 2001.
If less than two-thirds of your gross income for 2000 and 2001
is from farming, you cannot use these special estimated tax
payment and return due dates for your 2001 tax year. You generally
must make quarterly estimated tax payments on April 16, June 15, and
September 17, 2001, and on January 15, 2002. You must file your return
by April 15, 2002.
For more information on estimated taxes, see Publication 505.
Estimated Tax
Penalty for 2000
If you did not pay all your required estimated tax for 2000 by
January 16, 2001, or file your 2000 return and pay the tax by March 1,
2001, you should have used Form 2210-F,
Underpayment of Estimated Tax by Farmers and Fishermen,
to determine if you owed a penalty. If you owed a penalty but
did not file Form 2210-F with your return and pay the penalty,
you will get a notice from the IRS. You should pay the penalty as
instructed by the notice.
If you file your return by April 16 and pay the bill within 21
calendar days (10 business days if the bill is $100,000 or more) after
the notice date, the IRS will not charge you interest on the penalty.
Do not ignore a penalty notice, even if you think it is in
error. Occasionally, you may get a penalty notice even though
you filed your return on time, attached Form 2210-F, and met the
gross income from farming test. If you receive a penalty notice for
underpaying estimated tax that you think is in error, write to the
address on the notice and explain why you think the notice is in
error. Include a computation similar to the one in Example 1
(earlier), showing that you met the gross income from farming test.
Extension of Time To File Form 1040
If you do not file your 2000 return by March 1, 2001, the due date
for your return will be April 16, 2001. However, you generally can get
an automatic 4-month extension of time to file your return. Your Form
1040 would then be due by August 15, 2001.
You can get this extension in either of the following ways.
- File Form 4868, Application for Automatic Extension of
Time To File U.S. Individual Income Tax Return, by April 16,
2001, showing an accurate estimate of your 2000 tax liability. (The
filing of Form 4868 does not extend the time to pay the tax.)
- Call the IRS by April 16, 2001, and use a credit card to pay
part or all of your estimate of income tax due.
For more information, see the instructions for Form 4868.
This extension does not extend the March 1, 2001, filing date for
qualified farmers who did not make the required annual payment and
want to avoid an estimated tax penalty. Therefore, if you did not make
your required annual payment by January 16, 2001, and you file your
tax return after March 1, 2001, you will be subject to a penalty for
underpaying your estimated tax, even if you file Form 4868.
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