Publication 505 (2/2007), Tax Withholding and Estimated Tax

2. Estimated Tax for 2007

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

This section summarizes important changes that could affect your estimated tax payments for 2007. More information on these and other changes can be found in Publication 553.

Earned income credit (EIC). You may be able to take the EIC if:

A child lived with you and you earned less than $37,783 ($39,783 if married filing jointly), or
A child did not live with you and you earned less than $12,590 ($14,590 if married filing jointly).

The election to include combat pay as earned income for purposes of claiming the EIC is extended through 2007. The maximum investment income you can have and still get the credit has increased to $2,900. For more information, see Publication 596, Earned Income Credit (EIC).

Retirement savings plans. . The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. For more information, see Publication 590. Traditional IRA deduction limits increased. You may be able to take an IRA deduction if you were covered by a retirement plan at work and your 2007 modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or a qualifying widow(er)). Limit on elective deferral increases. The maximum elective deferral for 2007 is $15,500. For a SIMPLE plan, this amount is $10,500. Retirement savings contributions credit. For 2007, you may be able to claim this credit if your modified AGI is not more than $26,000 ($52,000 if married filing jointly, $39,000 if head of household). Catch-up contributions in certain employer bankruptcies. For 2007, 2008, and 2009, you may be able to deduct catch-up contributions of up to $3,000 each year to your IRA if you participated in a qualified cash or deferred arrangement (section 401(k) plan) of an employer who was a debtor in bankruptcy proceedings. For more details, see chapter 1 in Publication 590.

Certain credits no longer allowed against alternative minimum tax (AMT). The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, residential energy credits, mortgage interest credit, and the District of Columbia first-time homebuyer credit are no longer allowed against AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.

AMT exemption amount decreased. The AMT exemption amount will decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).

Credit for prior year minimum tax. . If you paid AMT before 2004 that you have not been able to credit against your regular tax liability, you may be able to claim a refundable tax credit for part of the AMT. To see if you qualify and to compute the refundable amount of your credit, see Publication 553.

Standard mileage rates. Beginning in 2007, the standard mileage rate for the cost of operating your car is:

48½ cents a mile for all business miles driven,
20 cents a mile for the use of your car for medical reasons,
20 cents a mile for the use of your car for a deductible move, and
14 cents a mile for the use of your car for charitable reasons.

Deduction for domestic production activities. . For 2007, the deduction rate will increase to 6%.

Deduction for qualified mortgage insurance premiums. . A homeowner who obtained a qualified mortgage in 2007, and whose AGI is less than $110,000 ($55,000 if married filing separately), may be able to deduct some of the mortgage insurance premiums paid during the year (as if they were mortgage interest) as an itemized deduction.

Health savings account (HSA). Beginning in 2007:

You can fund your HSA by making a one-time direct transfer from your IRA to your HSA.
The maximum deductible contribution is no longer limited to the annual deductible under the high deductible health plan.
You are allowed a maximum HSA contribution of $2,850 for single coverage ($5,650 for family coverage).

For more information about these and other changes to HSAs, see Publication 553.

Expired tax benefits. The following tax benefits have expired and will not apply for 2007. Certain relief granted for hurricanes Katrina, Wilma, and Rita.

Additional exemption for housing individuals displaced by Hurricane Katrina.
Tax-favored treatment of qualified hurricane distributions from eligible retirement plans.
Increased limits and delayed repayment on loans from qualified employer plans.
Increased limits for the Hope and lifetime learning credits.
Discharge of nonbusiness indebtedness by reason of Hurricane Katrina.

Other benefits.

Qualified electric vehicle credit.

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax on page 22), you may be charged a penalty even if you are due a refund when you file your tax return. For information on when the penalty applies, see chapter 4.

It would be helpful for you to keep a copy of your 2006 tax return and an estimate of your 2007 income nearby while reading this chapter.

Who must pay estimated tax,
How to figure estimated tax (including illustrated examples),
When to pay estimated tax,
How to figure each payment, and
How to pay estimated tax.

Publication

553 Highlights of 2006 Tax Changes

Form (and Instructions)

1040-ES
Estimated Tax for Individuals

See chapter 5 for information about how to get this publication and form.

Worksheets. The blank worksheets for chapter 2 are placed at the end of the chapter. See Table 2-2, on page 31, to locate what you need.

Who Does Not Have To Pay Estimated Tax

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer. See chapter 1.

Estimated tax not required. You do not have to pay estimated tax for 2007 if you meet all three of the following conditions.

You had no tax liability for 2006.
You were a U.S. citizen or resident alien for the whole year.
Your 2006 tax year covered a 12-month period.

You had no tax liability for 2006 if your total tax (defined on page 21 under Required Annual Payment—Line 14c) was zero or you did not have to file an income tax return.

Who Must Pay Estimated Tax

If you owed additional tax for 2006, you may have to pay estimated tax for 2007.

General Rule

You must pay estimated tax for 2007 if both of the following apply.

You expect to owe at least $1,000 in tax for 2007, after subtracting your withholding and credits.
You expect your withholding and credits to be less than the smaller of:
1. 90% of the tax to be shown on your 2007 tax return, or
2. 100% of the tax shown on your 2006 tax return. Your 2006 tax return must cover all 12 months.

You may find Figure 2-A (see next page) helpful in determining if you must pay estimated tax.

If all your income will be subject to income tax withholding, you probably do not need to pay estimated tax.

Example 1.

To figure whether she should pay estimated tax for 2007, Jane, who files as head of household, uses Figure 2-A and the following information.

Expected AGI for 2007	$78,725
AGI for 2006	$73,700
Tax shown on 2006 return	$10,504
Tax expected to be shown on 2007 return	$11,501
Tax expected to be withheld in 2007	$10,400

Jane's answer to the chart's first question is YES; she expects to owe at least $1,000 for 2007 after subtracting her withholding from her expected tax ($11,501 - $10,400 = $1,101). Her answer to the chart's second question is also YES; she expects her income tax withholding ($10,400) to be at least 90% of the tax to be shown on her 2007 return ($11,501 × 90% = $10,351). Jane does not need to pay estimated tax.

Example 2.

The facts are the same as in Example 1, except that Jane expects only $8,500 tax to be withheld in 2007. Because that is less than $10,351, her answer to the chart's second question is NO.

Jane's answer to the chart's third question is also NO; she does not expect her income tax withholding ($8,500) to be at least 100% of the tax shown on her 2006 return ($10,504). Jane must pay estimated tax for 2007.

Example 3.

The facts are the same as in Example 2, except that the tax shown on Jane's 2006 return was $8,000. Because she expects to have more than $8,000 withheld in 2007 ($8,500), her answer to the chart's third question is YES. Jane does not need to pay estimated tax for 2007.

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Figure 2-A: Do You Have To Pay Estimated Tax?

Figure 2-A. Do You Have To Pay Estimated Tax? Summary: This is the flowchart used to determine if a taxpayer has to make estimated tax payments.Start. This is the start of the flowchart.Decision (1). Will you owe $1000 or more for 2007 after subtracting income tax withholding and credits from your total tax? (Do not subtract any estimated tax payments.)

IF Yes Continue To Decision (2)

IF No Continue To Process (a)

Decision (2). Will your income tax withholding and credits be at least 90% (66 2/3% for farmers and fishermen) of the tax shown on your 2007 tax return?

IF Yes Continue To Process (a)

IF No Continue To Decision (3)

Decision (3). Will your income tax withholding and credits be at least 100% (see Footnote) of the tax shown on your 2006 tax return? Note: Your 2006 return must have covered a 12-month period.Footnote: 110% if less than two-thirds of your gross income for 2006 and 2007 is from farming or fishing and your 2006 was more than $150,000 ($75,000 if your filing status for 2007 is married filing a separate return).

IF Yes Continue To Process (a)

IF No Continue To Process (b)

Process (a). You are NOT required to pay estimated tax.

Continue To End

Process (b). You MUST make estimated tax payment(s) by the required due date(s). See When To Pay Estimated Tax.

Continue To End

End. This is the end of the flowchart.

Married Taxpayers

If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income.

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

However, you and your spouse cannot make joint estimated tax payments if:

You are legally separated under a decree of divorce or separate maintenance,
You and your spouse have different tax years, or
Either spouse is a nonresident alien (unless you elected to be treated as a resident alien). See Choosing Resident Alien Status in Publication 519.

If you do not qualify to make joint estimated tax payments, apply these rules to your separate estimated income.

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 2007.

2006 separate returns and 2007 joint return. If you plan to file a joint return with your spouse for 2007, but you filed separate returns for 2006, your 2006 tax is the total of the tax shown on your separate returns. You filed a separate return if you filed as single, head of household, or married filing separately.

2006 joint return and 2007 separate returns. If you plan to file a separate return for 2007, but you filed a joint return for 2006, your 2006 tax is your share of the tax on the joint return. You file a separate return if you file as single, head of household, or married filing separately.

To figure your share of the tax on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2006 using the same filing status as for 2007. Then multiply the tax on the joint return by the following fraction.

	The tax you would have paid had you filed a separate return
	The total tax you and your spouse would have paid had you filed separate returns

Example.

Joe and Heather filed a joint return for 2006 showing taxable income of $48,500 and a tax of $6,524. Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. For 2007, they plan to file married filing separately. Joe figures his share of the tax on the 2006 joint return as follows:

Tax on $40,100 based on separate return		$6,589
Tax on $8,400 based on separate return		886
Total		$7,475
Joe's percentage of total ($6,589 ÷ $7,475)		88%
Joe's share of tax on joint return ($6,524 × 88%)		$5,741

Special Rules

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

Farmers and Fishermen

If at least two-thirds of your gross income for 2006 or 2007 is from farming or fishing, substitute 66⅔% for 90% in (2a) under General Rule on this page.

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. To determine whether two-thirds of your gross income for 2006 was from farming or fishing, use as your gross income the total of the income (not loss) amounts.

Joint returns. On a joint return, you must add your spouse's gross income to your gross income to determine if at least two-thirds of your total gross income is from farming or fishing.

Gross income from farming. This is income from cultivating the soil or raising agricultural commodities. It includes the following amounts.

Income from operating a stock, dairy, poultry, bee, fruit, or truck farm.
Income from a plantation, ranch, nursery, range, orchard, or oyster bed.
Crop shares for the use of your land.
Gains from sales of draft, breeding, dairy, or sporting livestock.

For 2006, gross income from farming is the total of the amounts from:

Schedule F (Form 1040), Profit or Loss From Farming, line 11;
Form 4835, Farm Rental Income and Expenses, line 7;
Your share of a partnership's or S corporation's gross income from farming;
Your share of distributable net income from farming of an estate or trust; and
Your gains from sales of draft, breeding, dairy, or sporting livestock shown on Form 4797, Sales of Business Property.

Wages you receive as a farm employee and wages you receive from a farm corporation are not gross income from farming.

Gross income from fishing. This is income from catching, taking, harvesting, cultivating, or farming any kind of fish, shellfish (for example, clams and mussels), crustaceans (for example, lobsters, crabs, and shrimp), sponges, seaweeds, or other aquatic forms of animal and vegetable life.

Gross income from fishing includes the following amounts.

Income for services as an officer or crew member of a vessel while the vessel is engaged in fishing.
Your share of a partnership's or S corporation's gross income from fishing.
Income for services normally performed in connection with fishing.

Services normally performed in connection with fishing include:

Shore service as an officer or crew member of a vessel engaged in fishing, and
Services that are necessary for the immediate preservation of the catch, such as cleaning, icing, and packing the catch.

Higher Income Taxpayers

If your AGI for 2006 was more than $150,000 ($75,000 if your filing status for 2007 is married filing a separate return), substitute 110% for 100% in (2b) under General Rule on page 18. This rule does not apply to farmers and fishermen.

For 2006, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.

Aliens

Resident and nonresident aliens also may 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 alien 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

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.

How To Figure Estimated Tax

To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year.

When figuring your 2007 estimated tax, it may be helpful to use your income, deductions, and credits for 2006 as a starting point. Use your 2006 federal tax return as a guide. You can use Form 1040-ES to figure your estimated tax. Nonresident aliens use Form 1040-ES (NR) to figure estimated tax.

You must make adjustments both for changes in your own situation and for recent changes in the tax law. For 2007, there are several changes in the law. Some of these changes are discussed under What's New for 2007 at the beginning of this chapter. For information about these and other changes in the law, get Publication 553 or visit the IRS web site at www.irs.gov.

The instructions for Form 1040-ES include a worksheet to help you figure your estimated tax. Keep the worksheet for your records.

2007 Estimated Tax Worksheet

Use the worksheet (Figure 2-B), on page 20, to help guide you through the information about completing the 2007 Estimated Tax Worksheet. You also will find a blank worksheet on page 32.

Expected AGI—Line 1

Your expected AGI for 2007 (line 1) is your expected total income minus your expected adjustments to income.

Total income. Include in your total income all the income you expect to receive during the year, even income that is subject to withholding. However, do not include income that is tax exempt.

Total income includes all income and loss for 2007 that, if you had received it in 2006, would have been included on your 2006 tax return in the total on line 22 of Form 1040, line 15 of Form 1040A, or line 4 of Form 1040EZ.

Social security and railroad retirement benefits. If you expect to receive social security or tier 1 railroad retirement benefits during 2007, use Worksheet 2-1, on page 33, to figure the amount of expected taxable benefits you should include on line 1.

Adjustments to income. Be sure to subtract from your expected total income all of the adjustments you expect to take on your 2007 tax return. If you are using your 2006 return as a guide and filed Form 1040, your adjustments for 2006 were on lines 23-35, plus any write-in adjustments on line 36. If you filed Form 1040A, your 2006 adjustments were on lines 16-19.

Self-employed. If you expect to have income from self-employment, use Worksheet 2-2, on page 33, to figure your expected self-employment tax and your deduction for one-half of your self-employment tax. Include the amount from line 10 of Worksheet 2-2 in your expected adjustments to income. If you file a joint return and both you and your spouse have net earnings from self-employment, each of you must complete a separate worksheet.

Expected Taxable Income— Lines 2-5

Reduce your expected AGI for 2007 (line 1) by either your expected itemized deductions or your standard deduction and by your exemptions (lines 2 through 5).

Itemized deductions—Line 2. If you expect to claim itemized deductions on your 2007 tax return, subtract them from your expected AGI.

Itemized deductions are the deductions that can be claimed on Schedule A of Form 1040.

Phaseout of itemized deductions. For 2007, your total itemized deductions may be reduced if your AGI is more than $156,400 ($78,200 if married filing separately). If you expect your AGI to be more than that amount, use Worksheet 2-3, on page 34, to figure the amount to enter on line 2.

Standard deduction—line 2. If you expect to claim the standard deduction on your 2007 tax return, subtract it from your expected AGI. Use the 2007 Standard Deduction Tables, on page 42, to find your standard deduction.

No standard deduction. The standard deduction for some individuals is zero. Your standard deduction will be zero if you:

File a separate return and your spouse itemizes deductions,
Are a nonresident alien at any time during the tax year, or
Make a return for a period of less than 12 months because you change your accounting period.

Exemptions—line 4. After you have subtracted either your expected itemized deductions or your standard deduction from your expected AGI, reduce the amount remaining by $3,400 for each exemption you expect to take on your 2007 tax return. If another person (such as your parent) can claim an exemption for you on his or her tax return, you cannot claim your own personal exemption. This is true even if the other person will not claim your exemption or the exemption will be reduced or eliminated under the phaseout rule.

Reduction of personal exemption amount. For 2007, your deduction for personal exemptions is reduced if your AGI is larger than the AGI shown below for your filing status.

Single	$156,400
Married filing jointly or qualifying widow(er)	$234,600
Married filing separately	$117,300
Head of household	$195,500

If you expect your AGI to be more than that amount, use Worksheet 2-4, on page 34, to figure the amount to enter on line 4.

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Fig. 2-B. 2006 Estimated Tax Worksheet

2007 Estimated Tax Worksheet. Summary: This is an example of the worksheet used to determine the amount of estimated taxes the taxpayer needs to pay. The line items to be completed are:

“1. you expect in 2007 (see instructions below)” field

“2. If you plan to itemize deductions, enter the estimated total of your itemized deductions. Caution: If line 1 above is over $156,400 ($78,200 if married filing separately), your deduction may be reduced. See Pub. 505 for details. If you do not plan to itemize deductions, enter your standard deduction from page 1.” field

“3. Subtract line 2 from line 1” field

“4. Exemptions. Multiply $3,400 by the number of personal exemptions. Caution: See Pub. 505 to figure the amount to enter if line 1 above is over: $234,600 if married filing jointly or qualifying widow(er); $195,500 if head of household; $156,400 if single; or $117,300 if married filing separately” field

“5. Subtract line 4 from line 3” field

“6. Tax. Figure your tax on the amount on line 5 by using the 2007 Tax Rate Schedules on page 5. Caution: If you have qualified dividends or a net capital gain, see Pub. 505 to figure the tax” field

“7. Alternative minimum tax from Form 6251” field

“8. Add lines 6 and 7. Also include any tax from Forms 4972 and 8814 and any recapture of the education credits (see instructions below)” field

“9. Credits (see instructions below). Do not include any income tax withholding on this line” field

“10. Subtract line 9 from line 8. If zero or less, enter 0” field

“11. Self-employment tax (see instructions below). Estimate of 2007 net earnings from self-employment $(blank text field); if $97,500 or less, multiply the amount by 15.3%; if more than $97,500, multiply the amount by 2.9%, add $12,090.00 to the result, and enter the total. Caution: If you also have wages subject to social security tax, see Pub. 505 to figure the amount to enter” field

“12. Other taxes (see instructions below)” field

“13a. Add lines 10 through 12” field

“13b. Earned income credit, additional child tax credit, and credits from Form 4136 and Form 8885” field

“13c. Total 2007 estimated tax. Subtract line 13b from line 13a. If zero or less, enter 0” field

“14a. Multiply line 13c by 90% (66 2/3% for farmers and fishermen)” field

“14b. Enter the tax shown on your 2006 tax return (110% of that amount if you are not a farmer or fisherman and the shown on that return is more than $150,000, or, if married filing separately for 2007, more than $75,000)” field

“14c. Required annual payment to avoid a penalty. Enter the smaller of line 14a or 14b. Caution: Generally, if you do not prepay (through income tax withholding and estimated tax payments) at least the amount on line 14c, you may owe a penalty for not paying enough estimated tax. To avoid a penalty, make sure your estimate on line 13c is as accurate as possible. Even if you pay the required annual payment, you may still owe tax when you file your return. If you prefer, you can pay the amount shown on line 13c. For details, see Pub. 505.” field

“15. Income tax withheld and estimated to be withheld during 2007 (including income tax withholding on pensions, annuities, certain deferred income, etcetera)” field

“16. Subtract line 15 from line 14c. (Note: If zero or less or line 13c minus line 15 is less than $1,000, stop here. You are not required to make estimated tax payments.)” field

“17. If the first payment you are required to make is due April 16, 2007, enter 1/4 of line 16 (minus any 2006 overpayment that you are applying to this installment) here, and on your estimated tax payment voucher(s) if you are paying by check or money order. (Note: Household employers, see instructions below.)” field

Expected Taxes and Credits—Lines 6-13c

After you have figured your expected taxable income (line 5), follow the steps below to figure your expected taxes, credits, and total tax for 2007. Most people will have entries for only a few of these steps. However, you should check every step to be sure you do not overlook anything.

Step 1. Figure your expected income tax (line 6). Generally, you will use the 2007 Tax Rate Schedules, found on page 41 or in the instructions to Form 1040-ES, to figure your expected income tax. However, see below for situations where you must use a different method to compute your estimated tax.

Tax on investment income of child under age 18. You must use a special method to figure tax on the income of a child under age 18 who has more than $1,700 of investment income. See Tax for Children Under Age 18 Who Have Investment Income of More Than $1,700 in Publication 929, Tax Rules for Children and Dependents.

Tax on net capital gain. 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.

Tax on qualified dividends. The maximum tax rate for qualified dividends is 15% (generally, 5% for people whose other income is taxed at the 10% or 15% rate).

Tax on capital gain and qualified dividends. If you expect to have a net capital gain or qualified dividends, use Worksheet 2-5, on page 35, to figure your tax.

Tax if excluding foreign earned income or housing. If you expect to claim the foreign earned income exclusion or the housing exclusion on Form 2555 or Form 2555-EZ, use Worksheet 2-6, on page 36, to figure your estimated tax.

Step 2. Add your expected taxes (line 8). Include on line 8 the sum of:

Your tax on line 6;
Your expected alternative minimum tax (AMT) from Form 6251, Alternative Minimum Tax—Individuals, on line 7;
Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions (line 44, boxes a and b, of the 2006 Form 1040); and
Any recapture of education credits.

Step 3. Subtract your expected credits (line 9). If you are using your 2006 return as a guide and filed Form 1040, your total credits for 2006 were shown on line 56. If you filed Form 1040A, your total credits for 2006 were on line 34.

If your credits on line 9 are more than your taxes on line 8, enter “-0-” on line 10 and go to Step 4.

Step 4. Add your expected self-employment tax (line 11). You already should have figured your self-employment tax (see Self-employed under Expected AGI—Line 1, on page 20).

Step 5. Add your expected other taxes (line 12).

Other taxes include:

Taxes on early distributions from:
1. An IRA or other qualified plan,
2. An annuity, or
3. A modified endowment contract entered into after June 20, 1988,
Advance earned income credit payments,
Household employment taxes (before subtracting advance EIC payments made to your employee(s)) if:
1. You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income, or
2. You would be required to make estimated tax payments even if you did not include household employment taxes when figuring your estimated tax, and
Amounts written in on Form 1040, line 63.

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, or uncollected employee social security and Medicare or RRTA tax on tips or group-term life insurance.

If you filed a 2006 Form 1040A, your only other tax was any advance earned income credit payments on line 36.

Step 6. Subtract your expected earned income credit, additional child tax credit, Form 4136 fuel tax credit, and Form 8885 health coverage tax credit (line 13b). These are shown on the 2006 Form 1040, lines 66a, 68, 70b, and 70c.

To figure your expected fuel tax credit, do not include fuel tax for the first three quarters of the year that you expect to have refunded to you.

The earned income credit is shown on the 2006 Form 1040A, line 40a, and the additional child tax credit is shown on line 41.

The result of steps 1 through 6 is your total estimated tax for 2007 (line 13c).

Required Annual Payment— Line 14c

On lines 14a through 14c, figure the total amount you must pay for 2007, through withholding and estimated tax payments, to avoid paying a penalty.

General rule. The total amount you must pay is the smaller of:

90% of your total expected tax for 2007, or
100% of the total tax shown on your 2006 return. Your 2006 tax return must cover all 12 months.

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

Higher income taxpayers. If your AGI for 2006 was more than $150,000 ($75,000 if your filing status for 2007 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen.

For 2006, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.

Farmers and fishermen. If at least two-thirds of your gross income for 2006 or 2007 is from farming or fishing, your required annual payment is the smaller of:

66⅔% (.6667) of your total tax for 2007, or
100% of the total tax shown on your 2006 return. (Your 2006 tax return must cover all 12 months.)

For definitions of “gross income from farming” and “gross income from fishing,” see Farmers and Fishermen, under Special Rules, starting on page 18.

Total tax for 2006. Your 2006 total tax on Form 1040 is the amount on line 63 reduced by the total of the following.

The amounts on lines 59, 66a, and 68.
The following amounts included on line 60.
1. Any tax on excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts.
2. Any tax on excess accumulations in qualified retirement plans from Form 5329.
The following amounts included on line 63.
1. Any recapture of a federal mortgage subsidy.
2. Any tax on golden parachute payments.
3. Excise tax on insider stock compensation from an expatriated corporation.
4. Any uncollected employee social security, Medicare, or railroad retirement tax on tips or group-term life insurance.
Any credit from Form 4136 or Form 8885 included on line 70.

On Form 1040A, it is the amount on line 37 reduced by the amount on lines 40a and 41. On Form 1040EZ, it is the amount on line 11 reduced by the amount on line 8a.

Example. Jeremy Martin's total tax on his 2006 return was $43,203, and his expected tax for 2007 is $71,253. His 2006 AGI was $180,000. Because Jeremy had more than $150,000 of AGI in 2006, he figures his required annual payment as follows. He determines that 90% of his expected tax for 2007 is $64,128 (.90 × $71,253). Next, he determines that 110% of the tax shown on his 2006 return is $47,523 (1.10 x $43,203). Finally, he determines that his required annual payment is $47,523, the smaller of the two.

Total Estimated Tax Payments Needed—Line 16a

Use lines 15 and 16a to figure the total estimated tax you must pay for 2007. 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, on this page, and How To Figure Each Payment, on page 23.)

You do not have to pay estimated tax if:

Line 14c minus line 15 is zero or less, or
Line 13c minus line 15 is less than $1,000.

Withholding. Your expected withholding for 2007 (line 15) includes the income tax you expect to be withheld from all sources (wages, pensions and annuities, etc.). It also includes excess social security and railroad retirement tax you expect to be withheld from your wages.

For this purpose, you will have excess social security or tier 1 railroad retirement tax withholding for 2007 only if your wages from two or more employers are more than $97,500.

When To Pay Estimated Tax

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return. The payment periods and due dates for estimated tax payments are shown below.

For the period:		Due date:
Jan. 1 ¹ - March 31		April 15
April 1 - May 31		June 15
June 1 - August 31		September 15
Sept. 1 - Dec. 31		January 15 next year ²

¹If your tax year does not begin on January 1,
see Fiscal year taxpayers, below.

²See January payment, below.

Saturday, Sunday, holiday rule. If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next business day. For example, a payment due on Saturday, September 15, 2007, will be on time if you make it by Monday, September 17, 2007.

January payment. If you file your 2007 Form 1040 or Form 1040A by January 31, 2008, and pay the rest of the tax you owe, you do not need to make the payment due on January 15, 2008.

Example.

Janet Adams does not pay any estimated tax for 2007. She files her 2007 income tax return and pays the balance due shown on her return on January 24, 2008.

Janet's estimated tax for the fourth payment period is considered to have been paid on time. However, she may owe a penalty for not making the first three estimated tax payments. Any penalty for not making those payments will be figured up to January 24, 2008.

Fiscal year taxpayers. If your tax year does not start on January 1, your payment due dates are:

The 15th day of the 4th month of your fiscal year,
The 15th day of the 6th month of your fiscal year,
The 15th day of the 9th month of your fiscal year, and
The 15th day of the 1st month after the end of your fiscal year.

You do not have to make the last payment listed above if you file your income tax return by the last day of the first month after the end of your fiscal year and pay all the tax you owe with your return.

When To Start

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.

No income subject to estimated tax during first period. If you do not have income subject to estimated tax until a later payment period, you can make your first payment by the due date for that period. You can pay your entire estimated tax by the due date for that period or you can pay it in installments by the due date for that period and the due dates for the remaining periods. Table 2-1, below, shows the dates for making installment payments.

How much to pay to avoid penalty. To determine how much you should pay by each payment due date, see How To Figure Each Payment, beginning on page 23.

Table 2-1. Due Dates for Estimated Tax Installment Payments

If you first have income on which you must pay estimated tax:	Make a payment by:*	Make later installments by:*
Before April 1	April 15	June 15
		Sept. 15
		Jan. 15 next year
April 1-May 31	June 15	Sept. 15
		Jan. 15 next year
June 1-Aug. 31	Sept. 15	Jan. 15 next year
After Aug. 31	Jan. 15 next year	(None)

Farmers and Fishermen

If at least two-thirds of your gross income for 2006 or 2007 is from farming or fishing, you have only one payment due date for your 2007 estimated tax, January 15, 2008. The due dates for the first three payment periods, discussed under When To Pay Estimated Tax on page 22, do not apply to you.

If you file your 2007 Form 1040 by March 1, 2008, and pay all the tax you owe, you do not need to make an estimated tax payment.

Fiscal year farmers and fishermen. If you are a farmer or fisherman, but your tax year does not start on January 1, you can either:

Pay all your estimated tax by the 15th day after the end of your tax year, or
File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year.

How To Figure Each Payment

After you have figured your total estimated tax, figure how much you must pay by the due date of each payment period. You should pay enough by each due date to avoid a penalty for that period. If you do not pay enough during any payment period, you may be charged a penalty even if you are due a refund when you file your tax return. The penalty is discussed in chapter 4.

Regular Installment Method

If your first estimated tax payment is due April 17, 2007, you can figure your required payment for each period by dividing your annual estimated tax due (line 16a of the 2007 Estimated Tax Worksheet) by 4. Enter this amount on line 17. However, use this method only if your income is basically the same throughout the year.

Household employers. Reduce your required payment for each period by the amount of advance EIC payments you paid during the period.

Change in estimated tax. After you make an estimated tax payment, changes in your income, adjustments, deductions, credits, or exemptions may make it necessary for you to refigure your estimated tax. Pay the unpaid balance of your amended estimated tax by the next payment due date after the change or in installments by that date and the due dates for the remaining payment periods.

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, beginning on this page.

Amended estimated tax. If you refigure your estimated tax during the year, or if your first estimated tax payment is due after April 17, 2007, figure your required payment for each remaining payment period using Worksheet 2-7, on page 36.

Example.

Early in 2007, Mira Roberts figures that her estimated tax due is $1,800. She makes estimated tax payments on April 17 and June 15 of $450 each ($1,800 ÷ 4).

On July 10, she sells investment property at a gain. Her refigured estimated tax is $4,100. Her required estimated tax payment for the third payment period is $2,175, as shown in her filled-in Worksheet 2-7, on this page.

If Mira's estimated tax does not change again, her required estimated tax payment for the fourth payment period will be $1,025.

Worksheet 2-7. Amended Estimated Tax Worksheet—Illustrated


1.	Amended total estimated tax due			1.	$4,100
2.	Multiply line 1 by:
	50% (.50) if next payment is due June 15, 2007
	75% (.75) if next payment is due September 17, 2007
	100% (1.00) if next payment is due January 15, 2008	2.	3,075
3.	Estimated tax payments for all previous periods	3.	900
4.	Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment	4.	$2,175
	Note.If the payment on line 4 is due January 15, 2008, stop here.* Otherwise, go to line 5.*
5.	Add lines 3 and 4			5.	3,075
6.	Subtract line 5 from line 1 and enter the result (but not less than zero)			6.	1,025
7.	Each following required payment: If the payment on line 4 is due June 15, 2007, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 17, 2007, and January 15, 2008. If the amount on line 4 is due September 17, 2007, enter the full amount on line 6 here and on the payment voucher for your payment due January 15, 2008			7.	$1,025

Underpayment penalty. If your estimated tax payment for a previous period is less than one-fourth of your amended estimated tax, you may be charged a penalty for underpayment of estimated tax for that period when you file your tax return. See chapter 4 for more information.

Annualized Income Installment Method

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.

The annualized income installment method 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. To see whether you can pay less for any period, complete the 2007 Annualized Estimated Tax Worksheet (Worksheet 2-8), beginning on page 37.

You first must complete the 2007 Estimated Tax Worksheet through line 16b.

Use the result you figure on line 28 of the Annualized Estimated Tax Worksheet to make your estimated tax payments and complete your payment vouchers.

See Example 2, beginning on page 27, to see how the worksheet is completed.

If you use the annualized income installment method to figure your estimated tax payments, you must file Form 2210 with your 2007 tax return. See Annualized Income Installment Method (Schedule AI) in chapter 4 for more information.

Instructions for the 2007 Annualized Estimated Tax Worksheet (Worksheet 2-8)

Use Figure 2-C, on page 24, to help you follow these instructions. Another worksheet is available for your use on page 37.

The purpose of this worksheet is to determine your estimated tax liability as your income accumulates throughout the year, rather than dividing your entire year's estimated tax liability by four as if your income was earned equally throughout the year. The top of the worksheet (see page 24) 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 corresponding worksheet column to figure the payment due for that period.

This image is too large to be displayed in the current screen. Please click the link to view the image.

Figure 2-C. Worksheet for Annualized Income Installment Method.

This is an a blank worksheet for the annualized income installment method. A worksheet you can fill in, Worksheet 2-8, is found at the end of the chapter.

Line 1. Enter your AGI 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 AGI—Line 1 under How To Figure Estimated Tax, beginning on page 20.)

Self-employment income. If you had self-employment income, first complete Section B of this worksheet. Use the amounts on line 39 when figuring the AGI to enter in each column of Section A, line 1.

Line 4. Be sure to consider all deduction limits figured on Schedule A, such as reducing your medical expenses by 7.5% of your AGI, or reducing certain miscellaneous deductions by 2% of your AGI.

Line 6. Multiply line 4 by line 5 and enter the result on line 6, unless line 3 is more than $156,400 ($78,200 if married filing separately). In that case, use Worksheet 2-9, on page 38, to figure the amount to enter on line 6. Complete this worksheet for each period, as necessary.

Line 7. If you will not itemize your deductions, see the 2007 Standard Deduction Tables on page 42. Find your standard deduction in the appropriate table.

Line 10. Multiply $3,400 by your total expected exemptions, unless line 3 is more than the amount shown below for your filing status.

Single		$156,400
Married filing jointly or qualifying widow(er)		$234,600
Married filing separately		$117,300
Head of household		$195,500

In that case, use Worksheet 2-10, on page 39, to figure the amount to enter on line 10.

Line 12. Generally, you will use the 2007 Tax Rate Schedules on page 41 or in the instructions to Form 1040-ES to figure your annualized income tax. However, see below for situations where you must use a different method to compute your estimated tax.

Tax on investment income of child under age 18. You must use a special method to figure tax on the income of a child under 18 who has more than $1,700 investment income. See Tax for Children Under Age 18 Who Have Investment Income of More Than $1,700 in Publication 929.

Tax on net capital gain. 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.

Tax on qualified dividends. The maximum tax rate for qualified dividends is 15% (generally, 5% for people whose other income is taxed at the 10% or 15% rate).

Tax on capital gain and qualified dividends. If the amount on line 1 includes capital gains or qualified dividends, use Worksheet 2-11, on page 40, to figure the amount to enter on line 12.

Line 13. Enter your self-employment tax for the period from Section B, 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. These taxes include:

Tax on early distributions from qualified plans, including IRAs and other tax favored accounts,
Advance earned income credit payments,
Tax from Form 4972, Tax on Lump-Sum Distributions,
Tax from Form 8814, Parents' Election To Report Child's Interest and Dividends,
Tax from recapture of an education credit,
Household employment taxes that are reported on your income tax return, and
Amounts written in on Form 1040, line 63 (but see Exceptions below).

Exceptions. 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, and any uncollected social security, Medicare, or railroad retirement tax.

Alternative minimum tax (AMT). Use Form 6251, Alternative Minimum Tax—Individuals, to see if you also owe the AMT. Figure alternative minimum taxable income based on your income and deductions during the period shown in the column headings. Multiply this amount by the annualization amounts shown for each column on line 2 of the 2007 Annualized Estimated Tax Worksheet. Include any AMT owed in the amount on line 14 of this worksheet.

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 2006 return as a guide and filed Form 1040, your 2006 credits included the credits on lines 56, 66a, 68, and 70 boxes b and c. If you filed Form 1040A, your 2006 credits included the credits on lines 34, 40a, and 41.

Line 25. If line 24 is smaller than line 21 and you are not certain of the estimate of your 2007 tax, you can avoid a penalty by entering the amount from line 21 on line 25.

Line 27. For each period, include estimated tax payments made and any excess social security and railroad retirement tax.

Also include estimated federal income tax withholding. One-fourth of your estimated withholding is considered withheld 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 2007 by:

25% (.25) for the first period,
50% (.50) for the second period,
75% (.75) for the third period, and
100% (1.00) for the fourth period.

However, you may choose to include your withholding according to the actual dates on which the amounts were withheld. For each period, include payments made from the beginning of the period up to and including the payment due date. 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 Needed—Line 16a under How To Figure Estimated Tax, on page 22.

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.

Skip column (a).
On line 1, enter your income for the period that is effectively connected with a U.S. trade or business.
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 column (b).
2. 45% for column (c).
3. 30% for column (d).
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.
On line 22, enter one-half of the amount from line 16c of the Form 1040-ES (NR) 2007 Estimated Tax Worksheet in column (b), and one-fourth in columns (c) and (d).
On lines 20 and 23, skip column (b).
On line 27, if you do not use the actual withholding method, include one-third of your total expected withholding in column (b) and two-thirds in columns (c) and (d).

See Publication 519 for more information.

Estimated Tax Payments Not Required

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

One-fourth of your required annual payment, or
Your required annualized income installment for that period.

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.

How To Pay Estimated Tax

There are five ways to pay estimated tax.

Credit an overpayment on your 2006 return to your 2007 estimated tax.
Send in your payment (check or money order) with a payment voucher from Form 1040-ES.
Pay electronically using the Electronic Federal Tax Payment System (EFTPS).
Pay by electronic funds withdrawal if you are filing Form 1040 or Form 1040A electronically.
Pay by credit card using a pay-by-phone system or the Internet.

Credit an Overpayment

If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2006, you can apply part or all of it to your estimated tax for 2007. On line 75 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.

If you are a beneficiary of an estate or trust, and the trustee elects to credit 2007 trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, 2008.

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.

Example.

When Kathleen finished filling out her 2006 tax return, she saw that she had overpaid her taxes by $750. Kathleen knew she would owe additional tax in 2007. She credited $600 of the overpayment to her 2007 estimated tax and had the remaining $150 refunded to her.

In September, she amended her 2006 return by filing Form 1040X, Amended U.S. Individual Income Tax Return. It turned out that she owed $250 more in tax than she had thought. This reduced her 2006 overpayment from $750 to $500. Because the $750 had already been applied to her 2007 estimated tax or refunded to her, the IRS billed her for the additional $250 she owed, plus penalties and interest. Kathleen could not use any of the $600 she had credited to her 2007 estimated tax to pay this bill.

Pay by Check or Money Order Using the Estimated Tax Payment Voucher

Each payment of estimated tax by check or money order 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 2007 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. 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 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.

Do not use the address shown in the Form 1040 or Form 1040A instructions.

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

Change of address. You must notify the IRS if you are making estimated tax payments and you changed your address during the year. Send a clear and concise written statement to the Internal Revenue Service Center where you filed your last return and provide all of the following information.

Your full name (and your spouse's full name).
Your signature (and spouse's signature).
Your old address (and spouse's old address if different).
Your new address.
Your social security number (and spouse's social security number).

You can use Form 8822, Change of Address, for this purpose.

Note. If you have preprinted payment vouchers, continue to use them until the IRS sends you new ones. However, do not correct the address on the old voucher.

Pay by Electronic Federal Tax Payment System (EFTPS)

EFTPS is a free tax payment system designed with all taxpayers in mind. Online or by phone, you input your tax payment information electronically and you are done. EFTPS offers you convenience. Through EFTPS, you can schedule one-time or recurring payments for withdrawal from your checking or savings account up to 365 days in advance. You also can modify or cancel payments up to 2 business days before the scheduled withdrawal date. To use EFTPS, you must enroll. Enroll online at www.eftps.gov or call 1-800-555-4477 (for business accounts) or 1-800-316-6541 (for individual accounts) to receive an enrollment form and instructions by mail. TTY/TDD help is available by calling 1-800-733-4829. Call 1-800-244-4829 for Spanish.

Pay by Electronic Funds Withdrawal

If you electronically file your 2006 tax return, you can make up to four (4) 2007 estimated tax payments by electronic funds withdrawal. This is a free option. The payments can be withdrawn from either a checking or savings account. At the same time you file your return, you may schedule estimated tax payments for any or all of the following dates, April 17, 2007, June 15, 2007, September 17, 2007, and January 15, 2008.

Check with your tax return preparer or tax preparation software for details. Your scheduled payments will be acknowledged when you file your tax return.

Payments scheduled through electronic funds withdrawal can be cancelled up to 8 p.m. Eastern time, 2 business days before the scheduled payment date, by contacting the U.S. Treasury Financial Agent at 1-888-353-4537.

Pay by Credit Card

You can use your American Express® Card, Discover® Card, MasterCard® card, or Visa® card to make estimated tax payments. Call toll-free or visit the website of either service provider listed below and follow the instructions. A convenience fee will be charged by the service provider based on the amount you are paying. Fees may vary between providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You also can find out what the fee will be by calling the provider's toll-free automated customer service number or visiting the provider's website shown below.

Official Payments Corporation
1-800-2PAY-TAX ^SM (1-800-272-9829)
1-877-754-4413 (Customer Service)
www.officialpayments.com

Link2Gov Corporation
1-888-PAY-1040 ^SM (1-888-729-1040)
1-888-658-5465 (Customer Service)
www.PAY1040.com

You will be given a confirmation number at the end of the transaction. Fill in the Record of Estimated Tax Payments in the Form 1040-ES instructions. Enter the confirmation number in column (c), but do not include the amount of the convenience fee in column (d).

Illustrated Examples

The following examples show how to figure estimated tax payments under the regular installment method and under the annualized income installment method.

Example 1—Regular Installment Method

Early in 2007, Anne and Larry Jones figure their estimated tax payments for the year. They expect to receive the following income during 2007.

Larry's salary	$35,900
Unemployment compensation	600
Anne's net profit from self-employment	40,100
Net rental income	2,784
Interest income	6,205
Total	$85,589

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

Adjustment to income for IRA contributions	$ 1,000
Itemized deductions	11,025
Deduction for exemptions ($3,400 × 2)	6,800
2006 total tax	13,861
Withholding	3,396

The Joneses plan to file a joint return. They use the 2007 Estimated Tax Worksheet included in Form 1040-ES to figure their estimated tax payments. See their filled-in worksheet (Figure 2-D) on page 29.

Expected AGI. Anne can claim an income tax deduction for one-half of her self-employment tax as a business expense. So before the Joneses figure their expected AGI, they figure Anne's expected self-employment tax. See their filled-in Worksheet 2-2, on this page.

Worksheet 2-2. Expected Self-Employment Tax—Illustrated (Anne Jones)

1.	Enter your expected income and profits subject to self-employment tax*			1.	$40,100
2.	Multiply line 1 by 92.35% (.9235)			2.	37,032
3.	Multiply line 2 by 2.9% (.029)			3.	1,074
4.	Social security tax maximum income	4.	$97,500
5.	Enter your expected wages (if subject to social security tax)	5.	-0-
6.	Subtract line 5 from line 4	6.	97,500
	Note.If line 6 is zero or less, enter -0- on line 8 and skip to line 9.
7.	Enter the smaller of line 2 or line 6	7.	37,032
8.	Multiply line 7 by 12.4% (.124)			8.	4,592
9.	Add line 3 and line 8. Enter the result here and on line 11 of your 2007 Estimated Tax Worksheet			9.	$5,666
10.	Multiply line 9 by .50. This is your expected deduction for one-half of your self-employment tax.			10.	$2,833

*Your net profit from self-employment is found on line 31 of Schedule C or line 3 of Schedule C-EZ.

On line 11 of their 2007 Estimated Tax Worksheet, the Joneses enter $37,032 on the dotted line and $5,666 in the blank. They subtract one-half of that amount, $2,833, and their $1,000 adjustment for IRA contributions from their $85,589 total income to find their expected AGI, $81,756. They enter that amount on line 1 of the worksheet.

Expected taxable income. The Joneses find their standard deduction, $10,700, in the 2007 Standard Deduction Tables (see page 42). This is smaller than their expected itemized deductions, so they enter $11,025 on line 2 of the worksheet. They subtract the amount on line 2 from the amount on line 1 and enter the result, $70,731, on line 3. They enter their deduction for exemptions, $6,800, on line 4. After subtracting this amount, their expected taxable income on line 5 is $63,931.

Expected taxes and credits. The Joneses use the 2007 Tax Rate Schedule Y-1, on page 41, to figure their expected income tax, and enter $8,830 on line 6 of the worksheet. They do not expect to owe any other taxes that would be entered on lines 7 or 12, or have any credits that would be entered on lines 9 or 13b, so they leave those lines blank.

The Joneses' total expected tax on line 13c, after adding Anne's self-employment tax, is $14,496.

Estimated tax. The Joneses multiply their total expected tax by 90% and enter $13,046 on line 14a of the worksheet. They enter their 2006 tax on line 14b. Their required annual payment on line 14c is the smaller amount, $13,046.

They enter Larry's expected withholding, $3,396, on line 15 and subtract it from their required annual payment. Their estimated tax on line 16a is $9,650.

They are required to pay estimated tax because their estimated withholding (line 15) is:

Less than their “required annual payment to avoid a penalty” (line 14c), and
Not within $1,000 of their “total 2007 estimated tax” (line 13c).

Required estimated tax payment. The Joneses must pay their first estimated tax payment by April 17, 2007. They enter one-fourth of their estimated tax, $2,413, on line 17 of the worksheet and on their Form 1040-ES payment voucher that shows “Due April 16, 2007.” They mail the voucher with their payment to the address shown for their area in the Form 1040-ES instructions and record the payment on the Record of Estimated Tax Payments in the instructions.

If their estimated tax does not change during the year, the Joneses also will pay $2,413 estimated tax by June 15 and September 17, 2007, and January 15, 2008.

Example 2—Annualized Income Installment Method

The facts are the same as in Example 1—Regular Installment Method, 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 2007 Estimated Tax Worksheet, the Joneses decide to use the annualized income installment method to see if they can pay less than $2,413 estimated tax for one or more payment periods. They complete the 2007 Annualized Estimated Tax Worksheet (Worksheet 2-8) in this chapter. See their filled-in worksheet (Figure 2-E) on page 30.

First Period

On April 1, 2007, the Joneses complete the first column of the worksheet for the period January 1 through March 31. They had the following income for the period.

Larry's salary	$8,975
Unemployment compensation	600
Anne's net profit from self-employment	3,000
Net rental income	-0-
Interest income	990
Total	$13,565

They also take into account the following items for the period.

Adjustment to income for IRA contributions	$ 150
Itemized deductions	1,260
Withholding	849

Annualized AGI. Before the Joneses figure their AGI for the period, they first figure Anne's self-employment tax in Section B, and then her adjustment to income for self-employment tax.

On line 29 of Section B, they enter $2,771, which is Anne's net profit from self-employment for the period ($3,000 x .9235). The prorated social security tax limit is preprinted on line 30. She has no social security wages, so they enter zero on line 31, and $24,375 on line 32. Anne's annualized social security tax on line 34 is $1,374, ($2,771 × .496). Her annualized Medicare tax on line 36 is $321 ($2,771 × .116). Her total annualized self-employment tax on line 37 is $1,695. They enter that amount on line 13 of Section A.

The Joneses figure their adjustment to income for Anne's self-employment tax on lines 38 and 39 (Section B). That amount is $212 ($1,695 ÷ 8). They subtract that amount and their $150 IRA contributions from their $13,565 total income and enter their AGI for the period, $13,203, on line 1 of Section A. They multiply that amount by 4 and enter their annualized AGI, $52,812, on line 3.

Annualized taxable income. The Joneses figure their annualized itemized deductions ($1,260 × 4) on lines 4 through 6 of Section A. Because the result is smaller than their standard deduction, they enter their $10,700 standard deduction on line 8. After subtracting that amount and their $6,800 deduction for exemptions, the Joneses' annualized taxable income on line 11 is $35,312.

Annualized taxes and credits. The Joneses use the 2007 Tax Rate Schedule Y-1, on page 41, to figure their annualized income tax, $4,514, which they enter on line 12 of Section A.

They have no other taxes or credits for the period that would be entered on lines 14 or 16, so they leave those lines blank and enter $6,209 ($4,514 + $1,695) on lines 15 and 17. This is their annualized total tax.

Required estimated tax payment. The Joneses' annualized income installment on line 21 of Section A is $1,397 ($6,209 × 22.5%). On lines 22 and 24 they enter $3,262, one-fourth of their $13,046 required annual payment (line 14c of their 2007 Estimated Tax Worksheet). Because $1,397 is smaller, they enter that amount on lines 25 and 26.

Larry's total expected withholding for the year is $3,396. The Joneses can treat one-fourth of that amount, $849, as paid on April 15, or they can use Larry's actual withholding for the period. The Joneses enter $849 on line 27.

On line 28, the Joneses' required estimated tax payment for the period under the annualized income installment method is $548 ($1,397 - $849). They will send in an estimated tax payment of $548 for the first period.

Second, Third, and Fourth Periods

After the end of each remaining payment period, the Joneses complete the column of the worksheet for that period (from the beginning of the year through the end of that payment period) in the same way they did for the first period. They had the following income for each period.

	Second Period	Third Period	Fourth Period
	Jan. 1- May 31	Jan. 1- Aug. 31	Jan. 1- Dec. 31
Larry's salary	$14,958	$23,933	$35,900
Unemployment compensation	600	600	600
Anne's net profit from self-employment	6,000	16,000	40,100
Net rental income	696	2,784	2,784
Interest income	1,575	3,250	6,205
Total	$23,829	$46,567	$85,589

They also take into account the following items for each period.

	Second Period	Third Period	Fourth Period
	Jan. 1- May 31	Jan. 1- Aug. 31	Jan. 1- Dec. 31
Adjustment to income for IRA contributions	$ 250	$ 400	$1,000
Itemized deductions	2,835	6,720	11,025

For the second period, as for the first, the annualized income installment method allows the Joneses to pay less than their required payment under the regular installment method of figuring estimated tax payments. They make up the difference in the third and fourth periods when their income is higher.

Because the Joneses are using the annualized income installment method, they will file Form 2210 with their tax return for 2007.

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Figure 2-D. Illustrated Example 1--Regular Installment Method (Anne and Larry Jones)

2007 Estimated Tax Worksheet. Summary: This is an example of the estimated tax worksheet using the regular installment method. The completed line items are:

“1. you expect in 2007 (see instructions below)” field contains 81,756

“2. If you plan to itemize deductions, enter the estimated total of your itemized deductions. Caution: If line 1 above is over $150,500 ($75,250 if married filing separately), your deduction may be reduced. See Pub. 505 for details. If you do not plan to itemize deductions, enter your standard deduction from page 1” field contains 11,025

“3. Subtract line 2 from line 1” field contains 70,731

“5. Subtract line 4 from line 3” field contains 63,931

“8. Add lines 6 and 7. Also include any tax from Form 4972 and 8814 and any recapture of the education credits (see instructions below)” field contains 8,830

“10. Subtract line 9 from line 8. If zero or less, enter 0” field contains 8,830

“13a. Add lines 10 through 12” field contains 14,496

“13c. Total 2007 estimated tax. Subtract line 13b from line 13a. If zero or less, enter 0” field contains 14,496

“14a. Multiply line 13c by 90% (66 2/3% for farmers and fishermen)” field contains 13,046

“14b. Enter the tax shown on your 2006 tax return (110% of that amount if you are not a farmer or fisherman and the shown on that return is more than $150,000 or, if married filing separately for 2007, more than $75,000)” field contains 13,861

“14c. Required annual payment to avoid a penalty. Enter the smaller of line 14a or 14b” field contains 13,046

“15. Income tax withheld and estimated to be withheld during 2007 (including income tax withholding on pensions, annuities, certain deferred income, etcetera” field contains 3,396

“16. Subtract line 15 from line 14c. (Note: If zero or less or line 13c minus line 15 is less than $1,000, stop here. You are not required to make estimated tax payments” field contains 9,650

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Figure 2-E. Illustrated Example 2--Annualized Income Installment Method (Anne and Larry Jones)

Form 2210 (2006) Page 4. Summary: This is an example of the 2007 Annualized Estimated Tax Worksheet for Figure 4-C, Illustrated Example 2—Annualized Income Installment Method. The completed line items are:

Under “Section A (For Figuring Your Annualized Estimated Tax Payments)”:

“1. for each period. (Caution: See instructions.) Self-employed: Complete Section B first.”

“(a) 1/1/06-3/31/06” field contains 13,203

“(b) 1/1/06-5/31/06” field contains 23,155

“(c) 1/1/06-8/31/06” field contains 45,037

“(d) 1/1/06-12/31/06” field contains 81,756

“3. Annualized income. Multiply line 1 by line 2”

“(a) 1/1/06-3/31/06” field contains 52,812

“(b) 1/1/06-5/31/06” field contains 55,572

“(c) 1/1/06-8/31/06” field contains 67,555

“(d) 1/1/06-12/31/06” field contains 81,756

“4. Itemized deductions for period. If you do not expect to itemize, enter 0 and skip to line 7. ”

“(a) 1/1/06-3/31/06” field contains 1,260

“(b) 1/1/06-5/31/06” field contains 2,835

“(c) 1/1/06-8/31/06” field contains 6,720

“(d) 1/1/06-12/31/06” field contains 11,025

“6. Multiply line 4 by line 5 (Caution: See instructions and Worksheet 2-9)”

“(a) 1/1/06-3/31/06” field contains 5,040

“(b) 1/1/06-5/31/06” field contains 6,804

“(c) 1/1/06-8/31/06” field contains 10,080

“(d) 1/1/06-12/31/06” field contains 11,025

“7. Standard deduction from 2007 tables.”

“(a) 1/1/06-3/31/06” field contains 10,700

“(b) 1/1/06-5/31/06” field contains 10,700

“(c) 1/1/06-8/31/06” field contains 10,700

“(d) 1/1/06-12/31/06” field contains 10,700

“8. Enter the larger of line 6 or line 7”

“(a) 1/1/06-3/31/06” field contains 10,700

“(b) 1/1/06-5/31/06” field contains 10,700

“(c) 1/1/06-8/31/06” field contains 10,700

“(d) 1/1/06-12/31/06” field contains 11,250

“9. Subtract line 8 from line 3”

“(a) 1/1/06-3/31/06” field contains 42,112

“(b) 1/1/06-5/31/06” field contains 44,872

“(c) 1/1/06-8/31/06” field contains 56,855

“(d) 1/1/06-12/31/06” field contains 70,731

“10. Multiply $3,400 by your total expected exemptions. (Caution: See instructions and Worksheet 2-10.)”

“(a) 1/1/06-3/31/06” field contains 6,800

“(b) 1/1/06-5/31/06” field contains 6,800

“(c) 1/1/06-8/31/06” field contains 6,800

“(d) 1/1/06-12/31/06” field contains 8,600

“11. Subtract line 10 from line 9”

“(a) 1/1/06-3/31/06” field contains 35,312

“(b) 1/1/06-5/31/06” field contains 38,072

“(c) 1/1/06-8/31/06” field contains 50.055

“(d) 1/1/06-12/31/06” field contains 63,931

“12. Tax on the amount on line 11 from the 2007 Tax Rate Schedules. (Caution: See instructions and Worksheet 2-11.)”

“(a) 1/1/06-3/31/06” field contains 4,514

“(b) 1/1/06-5/31/06” field contains 4,928

“(c) 1/1/06-8/31/06” field contains 6,726

“(d) 1/1/06-12/31/06” field contains 8,830

“13. Self-employment tax from line 37 of Section B.”

“(a) 1/1/06-3/31/06” field contains 1,695

“(b) 1/1/06-5/31/06”field contains 2,035

“(c) 1/1/06-8/31/06” field contains 3,391

“(d) 1/1/06-12/31/06” field contains 5,666

“15. Total tax. Add lines 12, 13, and 14”

“(a) 1/1/06-3/31/06” field contains 6,209

“(b) 1/1/06-5/31/06” field contains 6,963

“(c) 1/1/06-8/31/06” field contains 10,117

“(d) 1/1/06-12/31/06” field contains 14,496

“17. Subtract line 16 from line 15. (If zero or less, enter 0.)”

“(a) 1/1/06-3/31/06” field contains 6,209

“(b) 1/1/06-5/31/06” field contains 6,963

“(c) 1/1/06-8/31/06” field contains 10,117

“(d) 1/1/06-12/31/06” field contains 14,496

“19. Multiply line 17 by line 18”

“(a) 1/1/06-3/31/06” field contains 1,397

“(b) 1/1/06-5/31/06” field contains 3,133

“(c) 1/1/06-8/31/06” field contains 6,829

“(d) 1/1/06-12/31/06” field contains 13,046

“20. Add the amounts on line 25 of all previous columns.”

“(b) 1/1/06-5/31/06” field contains 1,397

“(c) 1/1/06-8/31/06” field contains 3,133

“(d) 1/1/06-12/31/06” field contains 6,829

“21. Annualized income installment. Subtract line 20 from line 19. (If less than zero, enter 0.)”

“(a) 1/1/06-3/31/06” field contains 1,397

“(b) 1/1/06-5/31/06” field contains 1,736

“(c) 1/1/06-8/31/06” field contains 3,696

“(d) 1/1/06-12/31/06” field contains 6,217

“22. Divide line 14c of the Form 1040-ES Estimated Tax Worksheet by 4.”

“(a) 1/1/06-3/31/06” field contains 3,262

“(b) 1/1/06-5/31/06” field contains 3,262

“(c) 1/1/06-8/31/06” field contains 3,262

“(d) 1/1/06-12/31/06” field contains 3,262

“23. Subtract line 25 of preceding column from line 24 of preceding column.”

“(b) 1/1/06-5/31/06” field contains 1,864

“(c) 1/1/06-8/31/06” field contains 3,390

“(d) 1/1/06-12/31/06” field contains 2,956

“24. Add lines 22 and 23.”

“(a) 1/1/06-3/31/06” field contains 3,262

“(b) 1/1/06-5/31/06” field contains 5,126

“(c) 1/1/06-8/31/06” field contains 6,651

“(d) 1/1/06-12/31/06” field contains 6,217

“25. Enter the smaller of line 21 or line 24. (Caution: See instructions.)”

“(a) 1/1/06-3/31/06” field contains 1,397

“(b) 1/1/06-5/31/06” field contains 1,736

“(c) 1/1/06-8/31/06” field contains 3,696

“(d) 1/1/06-12/31/06” field contains 6,217

“26. Total required payments for the period. Add lines 20 and 25.”

“(a) 1/1/06-3/31/06” field contains 1,397

“(b) 1/1/06-5/31/06” field contains 3,133

“(c) 1/1/06-8/31/06” field contains 6,829

“(d) 1/1/06-12/31/06” field contains 13,046

“27. Estimated tax payments made (line 28 of preceding columns) and tax withholding through the due date for the period.”

“(a) 1/1/06-3/31/06” field contains 849

“(b) 1/1/06-5/31/06” field contains 2,246

“(c) 1/1/06-8/31/06” field contains 3,982

“(d) 1/1/06-12/31/06” field contains 7,678

“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.”

“(a) 1/1/06-3/31/06” field contains 548

“(b) 1/1/06-5/31/06” field contains 887

“(c) 1/1/06-8/31/06” field contains 2,847

“(d) 1/1/06-12/31/06” field contains 5,368

Under “Section B (For Figuring Your Annualized Estimated Self-Employment Tax)”:

“29. Net earnings from self-employment for the period.”

“(a) 1/1/06-3/31/06” field contains 2,771

“(b) 1/1/06-5/31/06” field contains 5,541

“(c) 1/1/06-8/31/06” field contains 14,776

“(d) 1/1/06-12/31/06” field contains 37,032

“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.”

“(a) 1/1/06-3/31/06” field contains 0

“(b) 1/1/06-5/31/06” field contains 0

“(c) 1/1/06-8/31/06” field contains 0

“(d) 1/1/06-12/31/06” field contains 0

“32. Subtract line 31 from line 30. If zero or less, enter 0.”

“(a) 1/1/06-3/31/06” field contains 24,375

“(b) 1/1/06-5/31/06” field contains 40,625

“(c) 1/1/06-8/31/06” field contains 65,000

“(d) 1/1/06-12/31/06” field contains 97,500

“34. Multiply line 33 by the smaller of line 29 or line 32.”

“(a) 1/1/06-3/31/06” field contains 1,374

“(b) 1/1/06-5/31/06” field contains 1,649

“(c) 1/1/06-8/31/06” field contains 2,748

“(d) 1/1/06-12/31/06” field contains 4,592

“36. Multiply line 29 by line 35.”

“(a) 1/1/06-3/31/06” field contains 321

“(b) 1/1/06-5/31/06” field contains 386

“(c) 1/1/06-8/31/06” field contains 643

“(d) 1/1/06-12/31/06” field contains 1,074

“37. Add lines 34 and 36. Enter the result here and on line 13 of Section A.”

“(a) 1/1/06-3/31/06” field contains 1,695

“(b) 1/1/06-5/31/06” field contains 2,035

“(c) 1/1/06-8/31/06” field contains 3,391

“(d) 1/1/06-12/31/06” field contains 5,666

“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 on line 1.”

“(a) 1/1/06-3/31/06” field contains 212

“(b) 1/1/06-5/31/06” field contains 424

“(c) 1/1/06-8/31/06” field contains 1,130

“(d) 1/1/06-12/31/06” field contains 2,833

Table 2-2. Where To Find Worksheets Use the following worksheets and tables to figure your correct estimated tax.

IF you need...	THEN use...	ON page...
the 2007 Estimated Tax Worksheet (ES Worksheet)		20, 32
to estimate your taxable social security and railroad retirement benefits—line 1 of ES Worksheet	Worksheet 2-1	33
to estimate your self-employment (SE) tax and your deduction for one-half of your SE tax—lines 1 and 11 of ES Worksheet	Worksheet 2-2	33
to reduce your itemized deductions because your estimated AGI is more than $156,400 ($78,200 if married filing separately)—line 2 of ES Worksheet	Worksheet 2-3	34
to reduce your exemption amount because your estimated AGI is more than $117,300—line 4 of ES Worksheet	Worksheet 2-4	34
to estimate your income tax if you have net capital gains or qualified dividends—line 6 of ES Worksheet	Worksheet 2-5	35
to estimate your income tax if you expect to claim a foreign earned income exclusion or housing exclusion on Form 2555 or Form 2555-EZ—line 6 of ES Worksheet	Worksheet 2-6	36
to refigure your estimated tax during the year	Worksheet 2-7	36
to figure your annualized estimated tax payments	Worksheet 2-8	37-38
to reduce your itemized deductions for line 6 of Worksheet 2-8 because line 3 of Worksheet 2-8 is more than $156,400 ($78,200 if married filing separately)	Worksheet 2-9	38
to reduce your exemptions for line 10 of Worksheet 2-8 because line 3 of Worksheet 2-8 is more than $117,300	Worksheet 2-10	39
to estimate your income tax for line 12 of Worksheet 2-8 if estimated income includes capital gains or qualified dividends	Worksheet 2-11	40
to estimate your income tax for line 12 of Worksheet 2-8 if you expect to claim a foreign earned income exclusion or housing exclusion on Form 2555 or Form 2555-EZ—line 12 of Annualized Estimated Tax Worksheet	Worksheet 2-12	41
2007 Tax Rate Schedules		41
2007 Standard Deduction Tables		42

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2006 Estimated Tax Worksheet

2007 Estimated Tax Worksheet. Summary: This is an example of the worksheet used to determine the amount of estimated taxes the taxpayer needs to pay. The line items to be completed are:

“1. AGI you expect in 2007 (see instructions below)” field

“3. Subtract line 2 from line 1” field

“4. Exemptions. Multiply $3,400 by the number of personal exemptions. If you can be claimed as a dependent on another person's 2006 return, your personal exemption is not allowed. Caution: See Pub. 505 to figure the amount to enter if line 1 above is over: $234,600 if married filing jointly or qualifying widow(er); $195,500 if head of household; $156,400 if single; or $117,300 if married filing separately” field

“5. Subtract line 4 from line 3” field

“7. Alternative minimum tax from Form 6251” field

“8. Add lines 6 and 7. Also include any tax from Forms 4972 and 8814 and any recapture of the education credits (see instructions below)” field

“9. Credits (see instructions below). Do not include any income tax withholding on this line” field

“10. Subtract line 9 from line 8. If zero or less, enter 0” field

“12. Other taxes (see instructions below)” field

“13a. Add lines 10 through 12” field

“13b. Earned income credit, additional child tax credit, and credits from Form 4136 and Form 8885” field

“13c. Total 2007 estimated tax. Subtract line 13b from line 13a. If zero or less, enter 0” field

“14a. Multiply line 13c by 90% (66 2/3% for farmers and fishermen)” field

“15. Income tax withheld and estimated to be withheld during 2007 (including income tax withholding on pensions, annuities, certain deferred income, etcetera)” field

“16. Subtract line 15 from line 14c. (Note: If zero or less or line 13c minus line 15 is less than $1,000, stop here. You are not required to make estimated tax payments.)” field

“17. If the first payment you are required to make is due April 17, 2007, enter 1/4 of line 16 (minus any 2006 overpayment that you are applying to this installment) here, and on your estimated tax payment voucher(s) if you are paying by check or money order. (Note: Household employers, see instructions below.)” field

Worksheet 2-1. 2007 Estimated Tax Worksheet—Line 1 Expected Taxable Social Security and Railroad Retirement Benefits

1.	Enter your expected social security and railroad retirement benefits	1.
2.	Enter one-half of line 1		2.
3.	Enter your expected total income. Do not include any social security and railroad retirement benefits, nontaxable interest income, nontaxable IRA distributions, or nontaxable pension distributions		3.
4.	Enter your expected nontaxable interest income		4.
5.	Add lines 2, 3, and 4		5.
6.	Enter your expected adjustments to income. Do not include any student loan interest deduction and any tuition and fees deduction		6.
7.	Subtract line 6 from line 5		7.
8.	Enter $25,000 ($32,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year)		8.
9.	Subtract line 8 from line 7. If zero or less, stop here. Do not include any social security or railroad retirement benefits on line 1 of your 2007 Estimated Tax Worksheet		9.
10.	Enter $9,000 ($12,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year)		10.
11.	Subtract line 10 from line 9. If zero or less, enter -0-		11.
12.	Enter the smaller of line 9 or line 10		12.
13.	Enter one-half of line 12		13.
14.	Enter the smaller of line 2 or line 13		14.
15.	Multiply line 11 by 85% (.85). If line 11 is zero, enter -0-		15.
16.	Add lines 14 and 15		16.
17.	Multiply line 1 by 85% (.85)		17.
18.	Expected taxable social security and railroad retirement benefits. Enter the smaller of line 16 or line 17. Include this amount in the total on line 1 of your 2007 Estimated Tax Worksheet		18.

Worksheet 2-2. 2007 Estimated Tax Worksheet—Line 1 Expected Self-Employment Tax and Deduction

1.	Enter your expected income and profits subject to self-employment tax*			1.
2.	Multiply line 1 by 92.35% (.9235)			2.
3.	Multiply line 2 by 2.9% (.029)			3.
4.	Social security tax maximum income	4.	$97,500
5.	Enter your expected wages (if subject to social security tax)	5.
6.	Subtract line 5 from line 4	6.
	Note. If line 6 is zero or less, enter -0- on line 8 and skip to line 9.
7.	Enter the smaller of line 2 or line 6	7.
8.	Multiply line 7 by 12.4% (.124)			8.
9.	Add line 3 and line 8. Enter the result here and on line 11 of your 2007 Estimated Tax Worksheet			9.
10.	Multiply line 9 by .50. This is your expected deduction for one-half of your self-employment tax. Subtract this amount when figuring your expected AGI on line 1 of your 2007 Estimated Tax Worksheet.			10.

*Your net profit from self-employment is found on line 31 of Schedule C or line 3 of Schedule C-EZ.

Worksheet 2-3. 2007 Estimated Tax Worksheet—Line 2 Phaseout of Itemized Deductions


1.	Enter the estimated total of your itemized deductions		1.
2.	Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses		2.
3.	Subtract line 2 from line 1		3.
	Note. If line 3 is zero or less, your deduction is not limited. Stop here and enter line 1 of this worksheet on line 2 of your 2007 Estimated Tax Worksheet.
4.	Multiply line 3 by 80% (.80)	4.
5.	Enter the amount from line 1 of the 2007 Estimated Tax Worksheet	5.
6.	Enter $156,400 ($78,200 if married filing separately)	6.
7.	Subtract line 6 from line 5	7.
	Note. If line 7 is zero or less, your deduction is not limited. Stop here and enter line 1 of this worksheet on line 2 of your 2007 Estimated Tax Worksheet.
8.	Multiply line 7 by 3% (.03)	8.
9.	Enter the smaller of line 4 or line 8		9.
10.	Divide line 9 by 3.0.		10.
11.	Subtract line 10 from line 9		11.
12.	Total itemized deductions. Subtract line 11 from line 1. Enter the result here and on line 2 of your 2007 Estimated Tax Worksheet		12.

Worksheet 2-4. 2007 Estimated Tax Worksheet—Line 4 Reduction of Exemption Amount


1.	Multiply $3,400 by the number of exemptions you plan to claim			1.
2.	Enter the amount from line 1 of your 2007 Estimated Tax Worksheet		2.
3.	Enter the amount shown below for your filing status.
	Single—$156,400
	Married filing jointly or qualifying widow(er)—$234,600
	Married filing separately—$117,300
	Head of household—$195,500		3.
4.	Subtract line 3 from line 2		4.
5.	Is line 4 more than $122,500 (more than $61,250 if married filing separately)?
		Yes. Multiply $1,133 by the number of exemptions you plan to claim and enter the result here and on line 4 of your 2007 Estimated Tax Worksheet. Do not complete the rest of this worksheet.
		No. 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 higher whole number (for example, increase 0.0004 to 1)	5.
6.	Multiply line 5 by 2% (.02). Enter the result as a decimal			6.	.
7.	Multiply line 1 by line 6			7.
8.	Divide line 7 by 1.5			8.
9.	Deduction for exemptions. Subtract line 8 from line 1. Enter the result here and on line 4 of your 2007 Estimated Tax Worksheet			9.

Worksheet 2-5. 2007 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet


1.	Enter the amount from line 5 of your 2007 Estimated Tax Worksheet			1.
2.	Enter your expected qualified dividends for 2007 ¹	2.
3.	Enter the net capital gain expected for 2007 ¹	3.
4.	Add lines 2 and 3		4.
5.	Enter your 28% rate gain or loss expected for 2007 ²	5.
6.	Enter the unrecaptured section 1250 gain expected for 2007	6.
7.	Add lines 5 and 6	7.
8.	Enter the smaller of line 3 or line 7		8.
9.	Subtract line 8 from line 4			9.
10.	Subtract line 9 from line 1. If zero or less, enter -0-		10.
11.	Enter the smaller of line 1 or $63,700 ($31,850 if single or married filing separately, or $42,650 if head of household)	11.
12.	Enter the smaller of line 10 or line 11	12.
13.	Subtract line 4 from line 1. If zero or less, enter -0-	13.
14.	Enter the larger of line 12 or line 13			14.
	Note.If line 11 and line 12 are the same, skip lines 15 and 16 and go to line 17.
15.	Subtract line 12 from line 11			15.
16.	Multiply line 15 by 5% (.05)				16.
	Note. If lines 1 and 11 are the same, skip lines 17-29 and go to line 30.
17.	Enter the smaller of line 1 or line 9		17.
18.	Enter the amount from line 15. If line 15 is blank, enter -0-		18.
19.	Subtract line 18 from line 17. If zero or less, enter -0-			19.
20.	Multiply line 19 by 15% (.15)				20.
	Note.If line 6 is zero or blank, skip lines 21-26 and go to line 27.
21.	Enter the smaller of line 3 or line 6		21.
22.	Add lines 4 and 14	22.
23.	Enter the amount from line 1 above	23.
24.	Subtract line 23 from line 22. If zero or less, enter -0-		24.
25.	Subtract line 24 from line 21. If zero or less, enter -0-			25.
26.	Multiply line 25 by 25% (.25)				26.
	Note.If line 5 is zero or blank, skip lines 27-29 and go to line 30.
27.	Add lines 14, 15, 19, and 25			27.
28.	Subtract line 27 from line 1			28.
29.	Multiply line 28 by 28% (.28)				29.
30.	Figure the tax on the amount on line 14 from the 2007 Tax Rate Schedules				30.
31.	Add lines 16, 20, 26, 29, and 30				31.
32.	Figure the tax on the amount on line 1 from the 2007 Tax Rate Schedules				32.
33.	Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 31 or line 32 here and on line 6 of the 2007 Estimated Tax Worksheet				33.

¹ 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.

² This includes a section 1202 exclusion from eligible gain on qualified small business stock and gain or loss from the sale or exchange of collectibles. See the instructions for Schedule D (Form 1040) for more information.

Worksheet 2-6. 2007 Estimated Tax Worksheet—Line 6 Foreign Earned Income Tax Worksheet


1.	Enter the amount from line 3 of your 2007 Estimated Tax Worksheet		1.
2.	Enter the amount from line 4 of your 2007 Estimated Tax Worksheet		2.
3.	Subtract line 2 from line 1. If less than zero, enter the amount in parentheses		3.
4.	Enter the total foreign earned income and housing amount you expect to exclude in 2007	4.
5.	Enter the total amount of any itemized deductions you will not be able to claim because they are related to excluded income	5.
6.	Subtract line 5 from line 4. If zero or less, enter -0-		6.
7.	Combine lines 3 and 6. If zero or less, enter -0-		7.
8.	Figure the tax on the amount on line 7. Use the 2007 Tax Rate Schedules or Worksheet 2-5,* as appropriate			8.
9.	Figure the tax on the amount on line 6 using the 2007 Tax Rate Schedules			9.
10.	Subtract line 9 from line 8. Enter the result here and on line 6 of the 2007 Estimated Tax Worksheet			10.
*If using Worksheet 2-5 (Qualified Dividends and Capital Gain Tax Worksheet), enter the amount from line 7 above on line 1 of Worksheet 2-5. Complete the rest of Worksheet 2-5 according to the worksheet's instructions. Then complete lines 9 and 10 above.

Worksheet 2-7. Amended Estimated Tax Worksheet


1.	Amended total estimated tax due		1.
2.	Multiply line 1 by:
	50% (.50) if next payment is due June 15, 2007
	75% (.75) if next payment is due September 17, 2007
	100% (1.00) if next payment is due January 15, 2008	2.
3.	Estimated tax payments made for all previous periods	3.
4.	Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment	4.
	Note.If the payment on line 4 is due January 15, 2008, stop here.* Otherwise, go to line 5.*
5.	Add lines 3 and 4		5.
6.	Subtract line 5 from line 1 and enter the result (but not less than zero)		6.
7.	Each following required payment: If the payment on line 4 is due June 15, 2007, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 17, 2007, and January 15, 2008. If the amount on line 4 is due September 17, 2007, enter the full amount on line 6 here and on the payment voucher for your payment due January 15, 2008		7.

Worksheet 2-8. 2007 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—2/28, 4/30, 7/31, 11/30.			(a) 1/1/07 to 3/31/07	(b) 1/1/07 to 5/31/07	(c) 1/1/07 to 8/31/07	(d) 1/1/07 to 12/31/07
1	AGI 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 -0- 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 2-9.)	6
7	Standard deduction from 2007 tables.	7
8	Enter the larger of line 6 or line 7.	8
9	Subtract line 8 from line 3.	9
10	Multiply $3,400 by your total expected exemptions. (Caution: See instructions and Worksheet 2-10.)	10
11	Subtract line 10 from line 9.	11
12	Tax on the amount on line 11 from the 2007 Tax Rate Schedules. (Caution: See instructions and Worksheet 2-11.)	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. (Caution: See instructions.) Do not include any income tax withholding on this line.	16
17	Subtract line 16 from line 15. (If less than zero, enter -0-.)	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 -0-.)	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 (line 28 of preceding columns) 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 2-8. 2007 Annualized Estimated Worksheet(Continued)

Section B (For Figuring Your Annualized Estimated Self-Employment Tax)—Complete each column after end of period shown.
			(a) 1/1/07 to 3/31/07	(b) 1/1/07 to 5/31/07	(c) 1/1/07 to 8/31/07	(d) 1/1/07 to 12/31/07
29	Net earnings from self-employment for the period.	29
30	Prorated social security tax limit.	30	$24,375	$40,625	$65,000	$97,500
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 31 from 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 AGI on line 1.	39

Worksheet 2-9. 2007 Annualized Estimated Tax Worksheet—Line 6 Phaseout of Itemized Deductions


1.	Enter line 4 of Section A		1.
2.	Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses		2.
3.	Subtract line 2 from line 1		3.
4.	Enter line 5 of Section A		4.
5.	Multiply line 1 by line 4		5.
	Note.If line 3 is zero or less, your deduction is not limited. Stop* here and enter line 5 above on line 6 of Section A.*
6.	Multiply line 3 by line 4		6.
7.	Multiply line 6 by 80% (.80)	7.
8.	Enter line 3 of Section A	8.
9.	Enter $156,400 ($78,200 if married filing separately)	9.
10.	Subtract line 9 from line 8	10.
	Note. If line 10 is zero or less, your deduction is not limited. Stop* here and enter line 5 of this worksheet on line 6 of Section A.*
11.	Multiply line 10 by 3% (.03)	11.
12.	Enter the smaller of line 7 or line 11		12.
13.	Divide line 12 by 3.0		13.
14.	Subtract line 13 from line 12		14.
15.	Total itemized deductions. Subtract line 14 from line 5. Enter the result here and on line 6 of Section A		15.

Worksheet 2-10. 2007 Annualized Estimated Tax Worksheet—Line 10 Reduction of Exemption Amount


1.	Multiply $3,400 by the number of exemptions you plan to claim			1.
2.	Enter line 3 of Section A		2.
3.	Enter the amount shown below for your filing status
	Single—$156,400 Married filing jointly or qualifying widow(er)—$234,600 Married filing separately—$117,300 Head of household—$195,500		3.
4.	Subtract line 3 from line 2		4.
5.	Is line 4 more than $122,500 (more than $61,250 if married filing separately)?
		Yes. Multiply $1,133 by the number of exemptions you plan to claim and enter the result here and on line 10 of Section A. Do not complete the rest of this worksheet.
		No. 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 higher whole number (for example, increase 0.0004 to 1)	5.
6.	Multiply line 5 by 2% (.02). Enter the result as a decimal			6.	.
7.	Multiply line 1 by line 6			7.
8.	Divide line 7 by 1.5			8.
9.	Deduction for exemptions. Subtract line 8 from line 1. Enter the result here and on line 10 of Section A			9.

Worksheet 2-11. 2007 Annualized Estimated Tax Worksheet—Line 12 Qualified Dividends and Capital Gain Tax Worksheet


1.	Enter line 11 of your 2007 Annualized Estimated Tax Worksheet			1.
2.	Enter your expected qualified dividends for 2007 ¹	2.
3.	Enter the net capital gain expected for 2007 ¹	3.
4.	Add lines 2 and 3		4.
5.	Enter your 28% rate gain or loss expected for 2007 ²	5.
6.	Enter the unrecaptured section 1250 gain expected for 2007	6.
7.	Add lines 5 and 6	7.
8.	Enter the smaller of line 3 or line 7		8.
9.	Subtract line 8 from line 4			9.
10.	Subtract line 9 from line 1. If zero or less, enter -0-		10.
11.	Enter the smaller of line 1 or $63,700 ($31,850 if single or married filing separately, or $42,650 if head of household)	11.
12.	Enter the smaller of line 10 or line 11	12.
13.	Subtract line 4 from line 1. If zero or less, enter -0-	13.
14.	Enter the larger of line 12 or line 13			14.
	Note.If line 11 and line 12 are the same, skip lines 15 and 16 and go to line 17.
15.	Subtract line 12 from line 11			15.
16.	Multiply line 15 by 5% (.05)				16.
	Note.If lines 1 and 11 are the same, skip lines 17-29 and go to line 30..
17.	Enter the smaller of line 1 or line 9		17.
18.	Enter the amount from line 15. If line 15 is blank, enter -0-		18.
19.	Subtract line 18 from line 17. If zero or less, enter -0-			19.
20.	Multiply line 19 by 15% (.15)				20.
	Note.If line 6 is zero or blank, skip lines 21-26 and go to line 27.
21.	Enter the smaller of line 3 or line 6		21.
22.	Add lines 4 and 14	22.
23.	Enter the amount from line 1 above	23.
24.	Subtract line 23 from line 22. If zero or less, enter -0-		24.
25.	Subtract line 24 from line 21. If zero or less, enter -0-			25.
26.	Multiply line 25 by 25% (.25)				26.
	Note.If line 5 is zero or blank, skip lines 27-29 and go to line 30.
27.	Add lines 14, 15, 19, and 25			27.
28.	Subtract line 27 from line 1			28.
29.	Multiply line 28 by 28% (.28)				29.
30.	Figure the tax on the amount on line 14 from the 2007 Tax Rate Schedules				30.
31.	Add lines 16, 20, 26, 29, and 30				31.
32.	Figure the tax on the amount on line 1 from the 2007 Tax Rate Schedules				32.
33.	Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 31 or line 32 here and on line 12 of the 2007 Annualized Estimated Tax Worksheet				33.

¹ 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.

Worksheet 2-12. 2007 Annualized Estimated Tax Worksheet—Line 12 Foreign Earned Income Tax Worksheet


1.	Enter the amount from line 9 of your 2007 Annualized Estimated Tax Worksheet		1.
2.	Enter the amount from line 10 of your 2007 Annualized Estimated Tax Worksheet		2.
3.	Subtract line 2 from line 1. If less than zero, enter the amount in parentheses		3.
4.	Enter the total foreign earned income and housing amount you expect to exclude in 2007	4.
5.	Enter the total amount of any itemized deductions you will not be able to claim because they are related to excluded income	5.
6.	Subtract line 5 from line 4. If zero or less, enter -0-		6.
7.	Combine lines 3 and 6. If zero or less, enter -0-		7.
8.	Figure the tax on the amount on line 7. Use the 2007 Tax Rate Schedules or Worksheet 2-11,* as appropriate			8.
9.	Figure the tax on the amount on line 6 using the 2007 Tax Rate Schedules			9.
10.	Subtract line 9 from line 8. Enter the result here and on line 12 of the 2007 Annualized Estimated Tax Worksheet			10.
*If using Worksheet 2-11 (Qualified Dividends and Capital Gain Tax Worksheet), enter the amount from line 7 above on line 1 of Worksheet 2-11. Complete the rest of Worksheet 2-11 according to the worksheet's instructions. Then complete lines 9 and 10 above.

2007 Tax Rate Schedules

Caution.Do not use Tax Rate Schedules to figure your 2006 taxes. Use only to figure your 2007 estimated taxes.

Schedule X—Use if your 2007 filing status is Single						Schedule Z—Use if your 2007 filing status is Head of household
If line 5 is:		The tax is:			of the	If line 5 is:		The tax is:			of the
Over—	But not over—				amount over—	Over—	But not over—				amount over—

$0	$7,825			10%	$0	$0	$11,200			10%	$0
7,825	31,850	$782.50	+	15%	7,825	11,200	42,650	$1,120.00	+	15%	11,200
31,850	77,100	4,386.25	+	25%	31,850	42,650	110,100	5,837.50	+	25%	42,650
77,100	160,850	15,698.75	+	28%	77,100	110,100	178,350	22,700.00	+	28%	110,100
160,850	349,700	39,148.75	+	33%	160,850	178,350	349,700	41,810.00	+	33%	178,350
349,700	- - - - - -	101,469.25	+	35%	349,700	349,700	- - - - - -	98,355.50	+	35%	349,700
Schedule Y-1—Use if your 2007 filing status is Married filing jointly or Qualifying widow(er)						Schedule Y-2—Use if your 2007 filing status is Married filing separately
If line 5 is:		The tax is:			of the	If line 5 is:		The tax is:			of the
Over—	But not over—				amount over—	Over—	But not over—				amount over—

$0	$15,650			10%	$0	$0	$7,825			10%	$0
15,650	63,700	$1,565.00	+	15%	15,650	7,825	31,850	$782.50	+	15%	7,825
63,700	128,500	8,772.50	+	25%	63,700	31,850	64,250	4,386.25	+	25%	31,850
128,500	195,850	24,972.50	+	28%	128,500	64,250	97,925	12,486.25	+	28%	64,250
195,850	349,700	43,830.50	+	33%	195,850	97,925	174,850	21,915.25	+	33%	97,925
349,700	- - - - - -	94,601.00	+	35%	349,700	174,850	- - - - - -	47,300.50	+	35%	174,850

2007 Standard Deduction Tables

If you are married filing 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 born before January 2, 1943, or you are blind.

Table 2-3. Standard Deduction Chart for Most People*

IF your filing status is...	THEN your standard deduction is...
Single or Married filing separately	$5,350
Married filing jointly or Qualifying widow(er) with dependent child	10,700
Head of household	7,850

* Do not use this chart if you were born before January 2, 1943, or you are blind, or if someone else can claim an exemption for you (or your spouse if married filing jointly). Use Table 2-4 or 2-5 instead.

Table 2-4. Standard Deduction Chart for People Born Before January 2, 1943, or Who are Blind*

Check the correct number of boxes below. Then go to the chart.
You	Born before January 2, 1943	Blind

Your spouse, if claiming spouse's exemption	Born before January 2, 1943	Blind

Total number of boxes you checked
IF your filing status is...	AND the number in the box above is...	THEN your standard deduction is...
Single	1	$6,650
	2	7,950
Married filing jointly or	1	11,750
Qualifying widow(er)	2	12,800
with dependent child	3	13,850
	4	14,900
Married filing	1	6,400
separately	2	7,450
	3	8,500
	4	9,550
Head of household	1	9,150
	2	10,450

* If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 2-5, instead.

Table 2-5. Standard Deduction Worksheet for Dependents

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

If you were born before January 2, 1943, or you are blind, check the correct number of boxes below. Then go to the worksheet.
You	Born before January 2, 1943	Blind

Your spouse, if claiming spouse's exemption	Born before January 2, 1943	Blind

Total number of boxes you checked

1.	Enter your earned income (defined below). If none, enter -0-.		1.
2.	Additional amount		2.	$300
3.	Add lines 1 and 2.		3.
4.	Minimum standard deduction.		4.	$850
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— $5,350	6.
	•	Married filing jointly or Qualifying widow(er) with dependent child—$10,700
	•	Head of household—$7,850
7.	Standard deduction.
	a.	Enter the smaller of line 5 or line 6. If born after January 1, 1943, and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b.	7a.
	b.	If born before January 2, 1943, or blind, multiply $1,300 ($1,050 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 2007.	7c.

Earned income includes 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.

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2. Estimated Tax for 2007

What's New for 2007

Introduction

Topics - This chapter discusses:

Useful Items - You may want to see:

Who Does Not Have To Pay Estimated Tax

Who Must Pay Estimated Tax

General Rule

Married Taxpayers

Special Rules

Farmers and Fishermen

Higher Income Taxpayers

Aliens

Estates and Trusts

How To Figure Estimated Tax

2007 Estimated Tax Worksheet

Expected AGI—Line 1

Expected Taxable Income— Lines 2-5

Expected Taxes and Credits—Lines 6-13c

Required Annual Payment— Line 14c

Total Estimated Tax Payments Needed—Line 16a

When To Pay Estimated Tax

When To Start

Farmers and Fishermen

How To Figure Each Payment

Regular Installment Method

Annualized Income Installment Method

Note.

Instructions for the 2007 Annualized Estimated Tax Worksheet (Worksheet 2-8)

Estimated Tax Payments Not Required

How To Pay Estimated Tax

Credit an Overpayment

Pay by Check or Money Order Using the Estimated Tax Payment Voucher

Pay by Electronic Federal Tax Payment System (EFTPS)

Pay by Electronic Funds Withdrawal

Pay by Credit Card

Illustrated Examples

Example 1—Regular Installment Method

Example 2—Annualized Income Installment Method

First Period

Second, Third, and Fourth Periods

Worksheets for Chapter 2

2007 Standard Deduction Tables