You must pay estimated tax for 2005 if both of the following apply.

To figure whether you must pay estimated tax, apply the rules discussed here to your separate estimated income. If you can make joint estimated tax payments, you can apply these rules on a joint basis.

You and your spouse can make joint estimated tax payments even if you are not living together.

You and your spouse cannot make joint estimated tax payments if:

Whether you and your spouse make joint estimated tax payments or separate payments will not affect your choice of filing a joint tax return or separate returns for 2005.

There are special rules for farmers, fishermen, and certain higher income taxpayers.

Resident and nonresident aliens may also have to pay estimated tax. Resident aliens should follow the rules in this publication, unless noted otherwise. Nonresident aliens should get Form 1040-ES(NR), U.S. Estimated Tax for Nonresident Alien Individuals.

You are an alien if you are not a citizen or national of the United States. You are a resident if you either have a green card or meet the substantial presence test. For more information about the substantial presence test, see Publication 519.

Estates and trusts also must pay estimated tax. However, estates (and certain grantor trusts that receive the residue of the decedent's estate under the decedent's will) are exempt from paying estimated tax for the first two years after the decedent's death.

Estates and trusts must use Form 1041-ES, Estimated Income Tax for Estates and Trusts, to figure and pay estimated tax.

Your expected adjusted gross income for 2005 (line 1 of the 2005 Estimated Tax Worksheet) is your expected total income minus your expected adjustments to income.

The 2005 Estimated Tax Worksheet is part of Form 1040-ES.

Reduce your expected adjusted gross income for 2005 (line 1 of the 2005 Estimated Tax Worksheet), by either your expected itemized deductions or your standard deduction and by your exemptions (lines 2 through 5 of the 2005 Estimated Tax Worksheet).

After you have figured your expected taxable income, follow the steps below to figure your expected taxes, credits, and total tax for 2005. Most people will have entries for only a few of these steps. However, you should check every step to be sure that you do not overlook anything. The 2005 Estimated Tax Worksheet is part of the instructions for Form 1040-ES. References in the worksheet to instructions are to those instructions.

A collectibles gain or loss is any gain or loss from the sale or exchange of a work of art, rug, antique, metal, gem, stamp, coin, or alcoholic beverage or other collectible that is a capital asset and that was held more than one year.

You figure the total amount you must pay for 2005 through withholding and estimated tax payments on lines 14a through 14c of the 2005 Estimated Tax Worksheet.

For 2004, AGI is the amount shown on Form 1040, line 36; Form 1040A, line 22; and Form 1040EZ, line 4.

Figure the total estimated tax you must pay for 2005 on lines 15 and 16 of the 2005 Estimated Tax Worksheet. Subtract your expected withholding from your required annual payment. You usually must pay this difference in four equal installments. (See When To Pay Estimated Tax and How To Figure Each Payment, later.)

If your total expected tax on line 13c, minus your expected withholding on line 15, is less than $1,000, you do not have to pay estimated tax.

You do not have to make estimated tax payments until you have income on which you will owe the tax. If you have income subject to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period. You can pay all your estimated tax at that time, or you can pay it in installments. If you choose to pay in installments, make your first payment by the due date for the first payment period. Make your remaining installment payments by the due dates for the later periods.

If at least two-thirds of your gross income for 2004 or 2005 is from farming or fishing, you have only one payment due date for your 2005 estimated tax, January 15, 2006. The due dates for the first three payment periods, discussed earlier under When To Pay Estimated Tax, do not apply to you.

A payment made by January 17, 2006, is considered made on January 15, 2006.

If you file your 2005 Form 1040 by March 1, 2006, and pay all the tax you owe, you do not need to pay estimated tax.

If your first estimated tax payment is due April 15, 2005, you can figure your required payment for each period by dividing your annual estimated tax due (line 16 of the 2005 Estimated Tax Worksheet) by 4. Use this method only if your income is basically the same throughout the year.

If you do not receive your income evenly throughout the year, your required estimated tax payments may not be the same for each period. See Annualized Income Installment Method, later.

If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method.

To see whether you can pay less for any period, complete the blank 2005 Annualized Estimated Tax Worksheet (Worksheet 2.10) later in this chapter. (Note. You must first complete the 2005 Estimated Tax Worksheet through line 16.) The worksheet annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Use the result you figure on line 28 to make your estimated tax payments and complete your payment vouchers.

See Example 2.10 for an illustration of the worksheet.

Instructions for Worksheet 2.10

The top of the worksheet shows the dates for each payment period. The periods build; that is, each period includes all previous periods. After the end of each payment period, complete the worksheet column for the period from the beginning of the tax year through the end of that payment period to figure the payment due for that period.

Line 1.   Enter your adjusted gross income for the period. This is your gross income, including your share of partnership or S corporation income or loss, for the period, minus your adjustments to income for that period. (See Expected Adjusted Gross Income under How To Figure Estimated Tax, earlier.)

Self-employment income.   If you had self-employment income, first complete Section B. Use the amounts on line 39 when figuring the amount of adjusted gross income to enter on line 1.

Line 4.   Be sure to consider all deduction limits figured on Schedule A.

Line 6.   Multiply line 4 by line 5 and enter the result on line 6, unless line 3 is more than $145,950 ($72,975 if married filing separately). In that case, use the following worksheet to figure the amount to enter on line 6. Complete this worksheet for each period.

Worksheet 2.7

1.	Enter line 4 of Section A
2.	Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses
3.	Subtract line 2 from line 1
4.	Enter line 5 of Section A
5.	Multiply line 1 by line 4
	Note.If line 3 is zero, stop here and enter line 5 on line 6 of Section A.
6.	Multiply line 3 by line 4
7.	Multiply line 6 by .80
8.	Enter line 3 of Section A
9.	Enter $145,950 ($72,975 if married filing separately)
10.	Subtract line 9 from line 8
11.	Multiply line 10 by .03
12.	Enter the smaller of line 7 or line 11
13.	Subtract line 12 from line 5. Enter the result here and on line 6 of Section A

Line 7.   See the 2005 Standard Deduction Tables at the end of this chapter. Find your standard deduction in the appropriate table.

Line 10.    Multiply $3,200 by your total expected exemptions, unless line 3 is more than the amount shown for your filing status in the following table.

Table 2.5

	Single	$145,950
	Married filing jointly or qualifying widow(er)	$218,950
	Married filing separately	$109,475
	Head of household	$182,450

  In that case, use the following worksheet to figure the amount to enter on line 10.

Worksheet 2.8

1.	Multiply $3,200 by your total expected exemptions
2.	Enter line 3 of Section A
3.	Enter the amount shown for your filing status from Table 2.5
4.	Subtract line 3 from line 2
5.	Divide line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next whole number
6.	Multiply line 5 by .02. Enter the result as a decimal, but not more than 1
7.	Multiply line 1 by line 6
8.	Subtract line 7 from line 1. Enter the result here and on line 10 of Section A

Line 12.   Use the 2005 Tax Rate Schedules at the end of this chapter or in the instructions to Form 1040-ES to figure your annualized income tax. For the special method that must be used to figure tax on the income of a child under 14 who has more than $1,600 investment income, see Tax on Investment Income of Child Under 14 in Publication 929, Tax Rules for Children and Dependents.

Capital gains tax computation.   The regular income tax rates for individuals do not apply to a net capital gain. Instead, your net capital gain is taxed at a lower maximum rate.

  The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.

Use the following worksheet to figure the amount to enter on line 12 if the amount on line 1 includes capital gain.

Worksheet 2.9

1.	Enter line 11 of your 2005 Annualized Estimated Tax Worksheet
2.	Enter your expected qualified dividends for 2005*
3.	Enter the net capital gain expected for 2005*
4.	Add lines 2 and 3
5.	Enter your 28% rate gain or loss expected for 2005.
6.	Enter the unrecaptured section 1250 gain expected for 2005
7.	Add lines 5 and 6
8.	Enter the smaller of line 3 or line 7
9.	Subtract line 8 from line 4
10.	Subtract line 9 from line 1. If zero or less, enter zero (0)
11.	Enter the smaller of line 1 or $59,400 ($29,700 if single or married filing separately or $39,800 if head of household).
12.	Enter the smaller of line 10 or line 11
13.	Subtract line 4 from line 1. If zero or less, enter zero (0).
14.	Enter the larger of line 12 or line 13. Note.If line 11 and line 12 are the same, skip lines 15 and 16 and go on to line 17.
15.	Subtract line 12 from line 11.
16.	Multiply line 15 by 5% (.05). Note. If lines 1 and 11 are the same, skip lines 17–23 and go to line 24
17.	Enter the smaller of line 1 or line 9.
18.	Subtract line 15 from line 17. If zero or less, enter zero (0)
19.	Multiply line 18 by 15% (.15). Note.If line 6 is zero or blank, skip lines 20–24 and go to line 25
20.	Enter the smaller of line 3 or line 6.
21.	Add lines 4 and 14
22.	Subtract line 1 from line 21. If zero or less, enter zero (0)
23.	Subtract line 22 from line 20. If zero or less, enter zero (0)
24.	Multiply line 23 by 25% (.25). Note.If line 5 is zero or blank, skip lines 25–27 and go to line 28
25.	Add lines 14, 15, 18, and 23
26.	Subtract line 25 from line 1.
27.	Multiply line 26 by 28% (.28).
28.	Tax on line 14 from the 2005 Tax Rate Schedule
29.	Add lines 16, 19, 24, 27, and 28
30.	Tax on line 1 from the 2005 Tax Rate Schedule
31.	Tax. Enter the smaller of line 29 or line 30 here and on line 12 of the 2005 Annualized Estimated Tax Worksheet
*If you expect to deduct investment interest expense, do not include on this line any qualified dividends or net capital gain that you will elect to treat as investment income.

A collectibles gain or loss is any gain or loss from the sale or exchange of a work of art, rug, antique, metal, gem, stamp, coin, or alcoholic beverage or other collectible that is a capital asset and that was held more than one year.

Line 13.   Enter your self-employment tax for the period from line 37.

Line 14.   Include all the taxes you will owe (other than income tax and self-employment tax) because of events that occurred during the period.

  If you filed a 2004 Form 1040, these include:

• Taxes on qualified plans, including IRAs, and other tax favored accounts,

• Advance earned income credit,

• Household employment taxes that are reported on your income tax return, and

• Amounts written in on line 62 of Form 1040.

Do not include tax on recapture of a federal mortgage subsidy, tax on golden parachute payments, excise tax on insider stock compensation from an expatriated corporation, social security and Medicare tax on unreported tip income, and any uncollected social security, Medicare, or railroad retirement tax.

  If you filed a 2004 Form 1040A, “other tax” is any advance earned income credit payments on line 37 of that form.

Line 16.   Include all the credits (other than withholding credits) you can claim because of events that occurred during the period. If you are using your 2004 return as a guide and filed Form 1040, your 2004 credits included the credits on lines 65a, 67, and 69 boxes b and c, and the credits that are included in the total on line 55. If you filed Form 1040A, your 2004 credits included the credits on lines 41a and 42.

Line 25.   If line 24 is smaller than line 21 and you are not certain of the estimate of your 2005 tax, you can avoid a penalty by entering the amount from line 21 on line 25.

Line 27.   Include all estimated tax payments credited to 2005 and federal income tax withholding through the payment due date for the period. Also include excess social security and excess railroad retirement for the period.

  Your withholding is considered paid in four equal installments, one on the due date of each payment period. To figure the amount to include on line 27 for each period, multiply your total expected withholding for 2005 by:

1. 25% (.25) for the first period,

2. 50% (.50) for the second period,

3. 75% (.75) for the third period, or

4. 100% (1.00) for the fourth period.

  You may choose to include your actual withholding through the due date for each period on line 27. You can make this choice separately for the taxes withheld from your wages and all other withholding. For an explanation of what to include in withholding, see Total Estimated Tax Payments under How To Figure Estimated Tax, earlier.

Worksheet 2.10. 2005 Annualized Estimated Tax Worksheet

(Note: For instructions, see Annualized Income Installment Method in Chapter 2.)

Section A (For Figuring Your Annualized Estimated Tax Payments)—Complete each column after end of period shown.
Estates and trusts: Use the following ending dates in each column—2/29, 4/30, 7/31, 11/30.				1/1/05 to 3/31/05	1/1/05 to 5/31/05	1/1/05 to 8/31/05	1/1/05 to 12/31/05
1	Adjusted gross income for each period. (Caution: See instructions.) Self-employed: Complete Section B first.		1
2	Annualization amounts.		2	4	2.4	1.5	1
3	Annualized income. Multiply line 1 by line 2.		3
4	Itemized deductions for period. If you do not expect to itemize, enter zero and skip to line 7.		4
5	Annualization amounts.		5	4	2.4	1.5	1
6	Multiply line 4 by line 5. (Caution: See instructions and Worksheet 2.7.)		6
7	Standard deduction from 2005 tables.		7
8	Enter the larger of line 6 or line 7.		8
9	Substract line 8 from line 3.		9
10	Multiply $3,200 by your total expected exemptions. (Caution: See instructions and Worksheet 2.8.)		10
11	Subtract line 10 from line 9.		11
12	Tax on the amount on line 11 from the 2005 Tax Rate Schedules. (Caution: See instructions and Worksheet 2.9.)		12
13	Self-employment tax from line 37 of Section B.		13
14	Other taxes for each payment period.		14
15	Total tax. Add lines 12, 13, and 14.		15
16	Credits for each period.		16
17	Subtract line 16 from line 15. (If less than zero, enter zero.)		17
18	Applicable percentage.		18	22.5%	45%	67.5%	90%
19	Multiply line 17 by line 18.		19
20	Add amounts on line 25 of all preceding columns.		20
21	Annualized income installment. Subtract line 20 from line 19. (If less than zero, enter zero.)		21
22	Divide line 14c of the Form 1040-ES Estimated Tax Worksheet by 4.		22
23	Subtract line 25 of preceding column from line 24 of preceding column.		23
24	Add lines 22 and 23.		24
25	Enter the smaller of line 21 or line 24. (Caution: See instructions.)		25
26	Total required payments for the period. Add lines 20 and 25.		26
27	Estimated tax payments made and tax withholding through the due date for the period.		27
28	Estimated tax payment required by the next due date. Subtract line 27 from line 26 and enter the result (but not less than zero) here and on your payment voucher.		28

Worksheet 2.10. (continued) 2005 Annualized Estimated Tax Worksheet

Section B (For Figuring Your Annualized Estimated Self-Employment Tax)—Complete each column after end of period shown.
				1/1/05 to 3/31/05	1/1/05 to 5/31/05	1/1/05 to 8/31/05	1/1/05 to 12/31/05
29	Net earnings from self-employment for the period		29
30	Prorated social security tax limit		30	$22,500	$37,500	$60,000	$90,000
31	Enter actual wages for the period subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax		31
32	Subtract line 31from line 30. If zero or less, enter -0-		32
33	Annualization amounts		33	0.496	0.2976	0.186	0.124
34	Multiply line 33 by the smaller of line 29 or line 32		34
35	Annualization amounts		35	0.116	0.0696	0.0435	0.029
36	Multiply line 29 by line 35		36
37	Add lines 34 and 36. Enter the result here and on line 13 of Section A	▶	37
38	Annualization amounts		38	8	4.8	3	2
39	Deduction for one-half of self-employment tax. Divide line 37 by line 38. Enter the result here. Also use this result to figure your adjusted gross income on line 1		39

Section B.   If you had income from self-employment during any period, complete the worksheet column for that period to figure your annualized self-employment tax before you complete the worksheet column for that period in Section A.

Nonresident aliens.   If you will file Form 1040NR and you do not receive wages as an employee subject to U.S. income tax withholding, the instructions for the worksheet are modified as follows.

1. Skip the first column.

2. On line 1, enter your income for the period that is effectively connected with a U.S. trade or business.

3. On line 17, increase your entry by the amount determined by multiplying your income for the period that is not effectively connected with a U.S. trade or business by the following:

   1. 72% for the second column,

   2. 45% for the third column, and

   3. 30% for the fourth column. However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2.4, 1.5, and 1, respectively, instead of the above percentages.

4. On line 22, enter one-half of the amount from line 16c of the Form 1040-ES(NR) 2005 Estimated Tax Worksheet in the second column, and one-fourth in the third and fourth columns.

5. On lines 20 and 23, skip column (b).

6. On line 27, if you do not use the actual withholding method, include one-third of your total expected withholding in the second column and two-thirds in the third and fourth columns.

  See Publication 519 for more information.

You do not have to pay estimated tax if your withholding in each payment period is at least as much as:

You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you will owe with your return under $1,000.

When you file your Form 1040 or Form 1040A for 2004 and you have an overpayment of tax, you can apply part or all of it to your estimated tax for 2005. On line 73 of Form 1040, or line 46 of Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. The amount you have credited should be taken into account when figuring your estimated tax payments.

The credit will be applied to your payments in the order necessary to avoid the penalty for underpayment of estimated tax. You cannot have any of that amount refunded to you until the close of that tax year. You also cannot use that overpayment in any other way.

Each payment of estimated tax must be accompanied by a payment voucher from Form 1040-ES. If you made estimated tax payments last year, you should receive a copy of the 2005 Form 1040-ES in the mail. It will have payment vouchers preprinted with your name, address, and social security number. Using the preprinted vouchers will speed processing, reduce the chance of error, and help save processing costs.

If you previously made one or more payments electronically, you will receive Form 1040-ES (E), which does not include payment vouchers. Instead please continue to make your payments electronically. This helps ensure that your account is properly and timely credited.

If you did not pay estimated tax last year, you will have to get a copy of Form 1040-ES from the IRS. See chapter 5. After you make your first payment, a Form 1040-ES package with the preprinted vouchers will be mailed to you. Follow the instructions in the package to make sure you use the vouchers correctly.

Use the window envelopes that came with your Form 1040-ES package. If you use your own envelopes, make sure you mail your payment vouchers to the address shown in the Form 1040-ES instructions for the place where you live.

If you file a joint return and you are making joint estimated tax payments, please enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return.

EFTPS is a free tax payment system that all individuals and businesses can use. You can make payments online or by phone.

Here are just a few of the benefits of this easy-to-use system.

For more information or details on enrolling, visit www.EFTPS.gov or call EFTPS Customer Service at 1-800-555-4477. Call 1-800-945-8900 if you are a TTY/TDD user. Call 1-800-945-8600 for Spanish.

You can make a 2005 estimated tax payment when you electronically file your 2004 Form 1040 or Form 1040A by authorizing an electronic funds withdrawal from your checking or savings account. Whether or not you have a balance due on your electronically filed tax return, you can schedule one estimated tax payment with an effective date of April 15, 2005, June 15, 2005, or September 15, 2005. Do not send in a Form 1040-ES payment voucher when you schedule an estimated tax payment by electronic funds withdrawal.

You can use your American Express®, Discover®, MasterCard®, or Visa® credit card to make estimated tax payments. Call or access by Internet one of the service providers listed below and follow the instructions of the provider. Each provider will charge a convenience fee based on the amount you are paying. You can find out what the fee will be by calling the provider's toll-free automated customer service number or visiting the provider's web site shown below.

See the Form 1040-ES instructions for more information.

Early in 2005, Anne and Larry Jones figure their estimated tax payments for the year. They expect to receive the following income during 2005:

They also use the following expected items to figure their estimated tax:

The Joneses plan to file a joint return. They use the 2005 Estimated Tax Worksheet included in Form 1040-ES to figure their estimated tax payments. Their filled-in worksheet follows this discussion.

The facts are the same as in Example 2.9, except that the Joneses do not expect to receive their income evenly throughout the year. Anne expects to receive the largest portion of her self-employment income during the last few months of the year, and the Joneses' rental income is from a vacation home rented only in the summer months.

After completing their 2005 Estimated Tax Worksheet, the Joneses decide to use the annualized income installment method to see if they can pay less than $1,746 estimated tax for one or more payment periods. They complete the 2005 Annualized Estimated Tax Worksheet (Worksheet 2.10) in this chapter. Their filled-in worksheet follows their filled-in 2005 Estimated Tax Worksheet at the end of this example.

2005 Standard Deduction Tables

Table 1. Standard Deduction Chart for Most People*

If your filing status is:	Your standard deduction is:
Single	$5,000
Married filing joint return or Qualifying widow(er) with dependent child	10,000
Married filing separate return	5,000
Head of household	7,300

*DO NOT use this chart if you were 65 or older or blind, OR if someone else can claim an exemption for you (or your spouse if married filing jointly). Use Table 2 or 3 instead.

Check the correct number of boxes below. Then go to the chart.
You	65 or older	Blind
Your spouse, if claiming spouse's exemption	65 or older	Blind
Total number of boxes you checked
If your filing status is:	And the number in the box above is:	Your standard deduction is:
Single	1	$6,250
	2	7,500
Married filing joint	1	11,000
return or Qualifying	2	12,000
widow(er) with	3	13,000
dependent child	4	14,000
Married filing	1	6,000
separate return	2	7,000
	3	8,000
	4	9,000
Head of household	1	8,550
	2	9,800

*If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 3, instead.

If you are married filling a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were 65 or older or blind.

If you were 65 or older or blind, check the correct number of boxes below. Then go to the worksheet.
You	65 or older	Blind
Your spouse, if claiming spouse's exemption	65 or older	Blind
Total number of boxes you checked

1.		Enter your earned income (defined below). If none, enter –0–.	1.
2.		Additional amount.	2.	$250
3.		Add lines 1 and 2.	3.
4.		Minimum amount.	4.	$800
5.		Enter the larger of line 3 or line 4.	5.
6.		Enter the amount shown below for your filing status.
	•	Single or Married filing separately— $5,000	6.
	•	Married filing jointly or Qualifying widow(er) with dependent child—$10,000
	•	Head of household—$7,300
7.	Standard deduction.
	a.	Enter the smaller of line 5 or line 6. If under 65 and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b.	7a.
	b.	If 65 or older or blind, multiply $1,250 ($1,000 if married or qualifying widow(er) with dependent child) by the number in the box above.	7b.
	c.	Add lines 7a and 7b. This is your standard deduction for 2005.	7c.

Earned incomeincludes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income.

*Use this worksheet ONLY if someone else can claim an exemption for you (or your spouse if married filing jointly).