Penalty Questions (2004 IRS FAQ)

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IRS FAQ 9.5 Estimated Tax: Penalty Questions

What is meant by "no tax liability" in the exceptions to the estimated tax penalty?

You do not have to pay estimated tax for 2004 if you meet all three of the following conditions.

1. You had no tax liability for 2003.

2. You were a U.S. citizen or resident for the whole year.

3. Your 2003 tax year covered a 12-month period.

You had no tax liability for 2003 if your total tax was zero or you did not have to file an income tax return.

Total tax for 2003. Your 2003 total tax on Form 1040 (PDF) is the amount on line 60 reduced by the total of the amounts on line 56, 63, and 65, any credit from Form 4136 (PDF) included on line 67, any recapture of a federal mortgage subsidy and any uncollected social security, Medicare, or railroad retirement tax included on line 60, and any tax on excess contributions to IRAs and medical savings accounts, and on excess accumulations in qualified retirement plans from Forms 5329 included on line 57.

On Form 1040A (PDF), it is line 38 reduced by the amount on line 41 and 42. On Form 1040EZ (PDF), it is line 10 reduced by line 8.

For additional information on this topic refer to Form 1040-ES (PDF), Estimated Tax for Individuals , and Publication 505, Tax Withholding and Estimated Tax .



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