Publication 595 |
2001 Tax Year |
When Do Fishermen Pay Estimated Tax & File Tax Returns?
When you must pay estimated tax and file your tax return depends on
what percentage of your gross income comes from fishing. Gross income
is discussed later.
General Rule For Making Estimated Tax Payments
You must make estimated tax payments for 2001 if you expect to owe
at least $1,000 in tax, after subtracting your withholding and
credits, and you expect your withholding and credits to be less than
the smaller of the following.
- 90% of the tax to be shown on your 2001 tax return.
- 100% of the tax shown on your 2000 tax return. Your 2000 tax
return must cover all 12 months for this rule to apply.
If at least two-thirds of your gross income for 2000 or 2001
is from fishing, substitute 66 2/3% for 90% in (1) above.
If you receive at least two-thirds of your total gross income from
fishing in the current or prior year, special estimated tax and return
due dates apply to you. See the discussion under Due Dates for
Qualified Fishermen, later.
What Is Gross Income?
Gross income is all income you receive in the form of money, goods,
property, and services that is not exempt from tax. Gross income
is not the same as total income shown on line 22 of Form 1040.
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 was
from fishing, use as your gross income the total amount of the
following income (not loss) items from your tax return.
- Wages, salaries, tips, etc., from Form 1040, line 7.
- Taxable interest from Form 1040, line 8a.
- Ordinary dividends from Form 1040, line 9.
- Taxable refunds of state and local taxes from Form 1040,
line 10.
- Alimony from Form 1040, line 11.
- Gross business income from Schedule C (Form 1040), line 7
(includes gross fishing income).
- Gross business receipts from Schedule C-EZ (Form
1040), line 1 (includes gross fishing income).
- Capital gains from Form 1040, line 13, including gains from
Schedule D (Form 1040). Losses are not netted against gains.
- Gains on sales of business property from Form 4797, line
14.
- 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 reported on
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 (includes
fishing income from Schedule E (Form 1040)).
- 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 from Form 1040, line 19.
- Other income reported on Form 1040, line 21, not included
with any of the items listed above.
Percentage From Fishing
Figure your gross income from all sources. Then figure your gross
income from fishing. Divide your fishing gross income by your total
gross income to determine the percentage from fishing.
Example 1.
James Smith had the following gross income and fishing income in
2001.
Gross Income
| Total |
Fishing |
Taxable interest |
$3,000 |
Dividends |
500 |
Rental income (Sch E) |
41,500 |
Fishing income (Sch C) |
75,000 |
$75,000 |
Schedule D |
5,000 |
|
Total |
$125,000 |
$75,000 |
Schedule D showed gain from the sale of a rental house 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 fishing
income. His gross fishing income is 60% of his total gross income
($75,000 × $125,000 = .60). Therefore, based on his 2001
income, he does not qualify to use the special estimated tax payment
and return due dates for 2001, discussed next. However, he would
qualify if at least two-thirds of his 2000 gross income was from
fishing.
Example 2.
Assume the same facts as in Example 1 except that Mr. Smith
received only $21,500, instead of $41,500, rental income. This made
his total gross income $105,000. He qualifies to use the special
estimated tax payment and return due dates discussed next, since 71.4%
(at least two-thirds) of his gross income is from fishing ($75,000
× $105,000 = .714).
Due Dates for
Qualified Fishermen
If at least two-thirds of your gross income for 2000 or 2001 was
from fishing, you are a qualified fisherman and can choose
either of the following options for your 2001 tax.
- Make your required annual payment, discussed next, by
January 15, 2002, and file your Form 1040 by April 15, 2002.
- File Form 1040 by March 1, 2002, 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 2000 or 2001 was
from fishing, only one estimated tax payment is due. The required
annual payment is the smaller of the following amounts.
- 66 2/3% (.6667) of your total tax for
2001.
- 100% of the total tax shown on your 2000 return. (The return
must cover all 12 months.)
2002 tax. If at least two-thirds of your gross income
for 2001 or 2002 is from fishing, you can choose either of the
following options for 2002.
- Make your required annual payment by January 15, 2003, and
file your Form 1040 by April 15, 2003.
- File Form 1040 by March 3, 2003, and pay all the tax
due.
Fiscal year fishermen.
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 Fishermen
If less than two-thirds of your gross income for 2000 and 2001
was from fishing, you cannot use the special estimated tax
payment procedures described previously for your 2001 tax year.
Instead, you should have made 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.
If less than two-thirds of your gross income for 2001 and 2002
is from fishing, you cannot use these special estimated tax
payment and return due dates for your 2002 tax year. You generally
must make quarterly estimated tax payments on April 15, June 17, and
September 16, 2002, and on January 15, 2003. You must file your return
by April 15, 2003.
For more information on estimated taxes, see Publication 505.
Estimated Tax Penalty
for 2001
If you did not pay all your required estimated tax for 2001, use
Form 2210-F, Underpayment of Estimated Tax by
Farmers and Fishermen, to determine if you owe a penalty. If you
owe a penalty but do 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 15 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.
You may get a penalty notice even
though you filed your return on time, attached Form 2210-F, and
met the gross income from fishing 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
(under Percentage From Fishing, earlier), showing that you
met the gross income from fishing test.
Other Filing Information
for 2001
Payment date on holiday or weekend.
If the last day for filing your return or making a payment falls on
a Saturday, Sunday, or legal holiday, your return or payment will be
on time if it is filed or made on the next business day. The actual
filing and payment due dates provided in this publication generally
reflect this adjustment for Saturdays, Sundays, and legal holidays.
Extension of time to file Form 1040.
If you choose not to file your 2001 return by March 1, 2002, the
due date for your return will be April 15, 2002. 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, 2002.
You can get this extension by filing Form 4868, Application
for Automatic Extension of Time To File U.S. Individual Income Tax
Return, by April 15, 2002. You can also get an extension by
using IRS e-file. Form 4868 does not extend the time for
paying taxes. For more information, see the instructions for Form
4868.
This extension does not extend the March 1, 2002, due
date for qualified fishermen 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 15, 2002, and you
file your tax return after March 1, 2002, you will be subject to a
penalty for underpaying your estimated tax, even if you get an
extension of time to file Form 1040.
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