Estimated Tax Payment and Return Due Dates

To determine when you must pay estimated tax and file your return, see Figure 2-A.

Caution:

Gross income is not the same as total income shown on line 22 of Form 1040.

Gross Income

Your gross income is all income you receive in the form of money, property, and services that is not exempt from tax. On a joint return, you must add your spouse's gross income to your gross income. To decide whether two-thirds of your gross income for 1999 was from farming, use as your gross income the total of the following income (not loss) amounts from your tax return.

• Wages, salaries, tips, etc.
• Taxable interest.
• Ordinary dividends.
• Taxable refunds of state and local taxes.
• Alimony received.
• Gross business income from Schedule C (Form 1040), line 7.
• Gross receipts from Schedule C-EZ (Form 1040), line 1.
• Capital gains from Schedule D (Form 1040). Losses cannot be netted against gains.
• Gains on sales of business property from Form 4797.
• Taxable IRA distributions, pensions, annuities, and social security benefits.
• Gross rental income from Schedule E (Form 1040), line 3.
• Gross royalty income from Schedule E (Form 1040), line 4.
• Your taxable net income from an estate or trust, Schedule E (Form 1040), line 36.
• Income from a REMIC reported on Schedule E (Form 1040), line 38.
• Gross farm rental income from Form 4835, line 7.
• Farm income from Schedule F (Form 1040), line 11.
• Your distributive share of gross income from a partnership or limited liability company treated as a partnership from Schedule K-1 (Form 1065).
• Your pro rata share of gross income from an S corporation from Schedule K-1 (Form 1120S).
• Unemployment compensation as reported on Form 1099-G.
• Other income reported on Form 1040, line 21, not reported with any of the items listed above.

There are brief descriptions of forms and schedules used by farmers later.

Gross Income From Farming

Gross income from farming includes the following.

• Gross farm income from Schedule F (Form 1040), line 11.
• Gross farm rental income from Form 4835, line 7.
• Gross farm income from Schedule E (Form 1040), Parts II and III. See the instructions for line 41.
• Gains from the sale of livestock used for draft, breeding, sport, or dairy purposes reported on Form 4797.

Caution:

Wages you receive as a farm employee are not farm income. This includes wages you receive from a farm corporation even if you are a stockholder in the corporation. If all or most of your income is from wages as a farm employee, your employer is usually required to withhold income tax from your wages. You may also have to make estimated tax payments if you do not have enough tax withheld. For more information, see Publication 505.

Percentage From Farming

Total your gross income from all sources as shown earlier. Then total your gross income from farming. Divide your farm gross income by your total gross income to determine the percentage of gross income from farming.

Example 1. James Smith had the following total gross income and farm gross income in 1999:

Schedule D showed gain from the sale of dairy cows carried over from Form 4797 ($5,000) in addition to a loss from the sale of corporate stock ($2,000). However, that loss is not netted against the gain to figure Mr. Smith's total gross income or his gross farm income. His gross farm income is 64% of his total gross income ($80,000 $125,000 = .64). Therefore, based on his 1999 income, he does not qualify to use the special estimated tax payment and return due dates for 1999. However, he does qualify if at least two-thirds of his 1998 gross income was from farming.

Example 2. Assume the same facts as in Example 1 except that Mr. Smith also received gross farm rental income (Form 4835) of $15,000. This made his total gross income $140,000 and his farm gross income $95,000. He qualifies to use the special estimated tax payment and return due dates since at least two-thirds of his gross income is from farming [$95,000 $140,000 = .679 (67.9%)].

Due Dates for Qualified Farmers

If at least two-thirds of your gross income for 1998 or 1999 was from farming, you have only one payment due date for 1999 estimated tax--January 18, 2000.

For your 1999 tax, you may either:

1. Pay all your estimated tax (figured on Form 1040-ES) by January 18, 2000, and file your Form 1040 by April 17, 2000, or
2. File your Form 1040 by March 1, 2000, and pay all the tax due. You are not required to make an estimated tax payment. If you pay all the tax due, you will not be penalized for failure to pay estimated tax.

TaxTip:

1. Pay all your estimated tax by January 16, 2001, and file your Form 1040 by April 16, 2001, or
2. File your Form 1040 by March 1, 2001, and pay all the tax due.

camere OhridRequired annual payment. If at least two-thirds of your gross income for 1998 or 1999 was from farming, the required annual payment due January 18, 2000, is the smaller of the following.

1. 66 2/3% (.6667) of your total tax for 1999, or
2. 100% of the total tax shown on your 1998 return. (The return must cover all 12 months.)

TaxTip:

1. 66 2/3% (.6667) of your total tax for 2000, or
2. 100% of the total tax shown on your 1999 return. (The return must cover all 12 months.)

Fiscal year farmers. If you qualify to use these special rules but your tax year does not start on January 1, you may file your return and pay the tax by the first day of the 3rd month after the close of your tax year. Or you may pay your required estimated tax within 15 days after the end of your tax year. Then file your return and pay any balance due by the 15th day of the 4th month after the end of your tax year.

Due Dates for Nonqualified Farmers

cheap hotels in RotterdamIf less than two-thirds of your gross income for 1998 and 1999 was from farming, you cannot use these special estimated tax payment and return due dates for your 1999 tax year. In this case, you generally must make quarterly estimated tax payments on April 15, June 15, and September 15, 1999, and on January 18, 2000. You must file your return by April 17, 2000.

If less than two-thirds of your gross income for 1999 and 2000 is from farming, you cannot use these special estimated tax payment and return due dates for your 2000 tax year. You generally must make quarterly estimated tax payments on April 17, June 15, and September 15, 2000, and on January 16, 2001. You must file your return by April 16, 2001.

For more information on estimated taxes, see Publication 505.

Estimated Tax Penalty for 1999

If you did not pay all your required estimated tax for 1999 by January 18, 2000, or file your 1999 return and pay the tax by March 1, 2000, you should have used Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to determine if you owed a penalty. If you owed a penalty but did not file Form 2210-F with your return and pay the penalty, you will get a notice from the IRS. You should pay the penalty as instructed by the notice.

If you file your return by April 17 and pay the bill within 21 days (10 days if the bill is $100,000 or more) after the notice date, the IRS will not charge you interest on the penalty.

Caution:

Do not ignore a penalty notice, even if you think it is in error. Occasionally, you may get a penalty notice even though you filed your return on time, attached Form 2210-F, and met the gross income test. If you receive a penalty notice for underpaying estimated tax that you think is in error, write to the address on the notice and explain why you think the notice is in error. Include a computation, similar to the one in Example 1 (earlier), showing that you meet the gross income test.

Other Filing Information for 1999

Payment date on holiday or weekend.hôtels Funchal If the last day for filing your return or making a payment falls on a Saturday, Sunday, or legal holiday, your return or payment will be on time if it is filed or made on the next business day.

Automatic extension of time to file Form 1040. If you do not choose to file your 1999 return by March 1, 2000, the due date for your return will be April 17, 2000. However, you can get an automatic 4-month extension of time to file your return. Your Form 1040 would then be due by August 15, 2000. To get this extension, file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, by April 17, 2000. The filing of Form 4868 does not extend the time to pay the tax. For more information, see the instructions for Form 4868.

Caution:

This extension does not extend the March 1, 2000, filing date for farmers who did not make an estimated tax payment and want to avoid an estimated tax penalty. Therefore, if you did not make an estimated tax payment by January 18, 2000, and you file your tax return after March 1, 2000, you will be subject to a penalty for underpaying your estimated tax, even if you file Form 4868.