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Free State Tax Efile

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Free State Tax Efile

Free state tax efile 4. Free state tax efile   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Free state tax efile Higher income taxpayers. Free state tax efile Minimum required for higher income taxpayers. Free state tax efile Estate or trust payments of estimated tax. Free state tax efile Lowering or eliminating the penalty. Free state tax efile ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. Free state tax efile Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. Free state tax efile You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Free state tax efile No penalty. Free state tax efile   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Free state tax efile The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Free state tax efile (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Free state tax efile ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Free state tax efile Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Free state tax efile You did not have a tax liability for 2012. Free state tax efile You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Free state tax efile IRS can figure the penalty for you. Free state tax efile   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Free state tax efile Generally, the IRS will figure the penalty for you and send you a bill. Free state tax efile   You only need to figure your penalty in the following three situations. Free state tax efile You are requesting a waiver of part, but not all, of the penalty. Free state tax efile You are using the annualized income installment method to figure the penalty. Free state tax efile You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Free state tax efile However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. Free state tax efile See Form 2210 , later. Free state tax efile Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. Free state tax efile Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. Free state tax efile General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. Free state tax efile (Your 2012 tax return must cover a 12-month period. Free state tax efile ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Free state tax efile Special rules for certain individuals. Free state tax efile   There are special rules for farmers and fishermen and certain higher income taxpayers. Free state tax efile Farmers and fishermen. Free state tax efile   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. Free state tax efile   See Farmers and Fishermen , later. Free state tax efile Higher income taxpayers. Free state tax efile   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . Free state tax efile This rule does not apply to farmers or fishermen. Free state tax efile   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Free state tax efile Penalty figured separately for each period. Free state tax efile   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. Free state tax efile This is true even if you are due a refund when you file your income tax return. Free state tax efile Example. Free state tax efile You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Free state tax efile Early in January 2014, you made an estimate of your total 2013 tax. Free state tax efile Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Free state tax efile On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Free state tax efile Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Free state tax efile You do not owe a penalty for your payment due January 15, 2014. Free state tax efile However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. Free state tax efile Minimum required each period. Free state tax efile   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. Free state tax efile 5% of your 2013 tax, or 25% of your 2012 tax. Free state tax efile (Your 2012 tax return must cover a 12-month period. Free state tax efile ) Minimum required for higher income taxpayers. Free state tax efile   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Free state tax efile 5% for 25% in (2) under General Rule . Free state tax efile When penalty is charged. Free state tax efile   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. Free state tax efile If a payment is mailed, the date of the U. Free state tax efile S. Free state tax efile postmark is considered the date of payment. Free state tax efile   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Free state tax efile ) is considered to be the date of payment. Free state tax efile Estate or trust payments of estimated tax. Free state tax efile   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. Free state tax efile Amended returns. Free state tax efile    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. Free state tax efile If you file an amended return after the due date of the original return, use the tax shown on the original return. Free state tax efile   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. Free state tax efile This rule applies only if both original separate returns were filed on time. Free state tax efile 2012 separate returns and 2013 joint return. Free state tax efile    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. Free state tax efile You filed a separate return if you filed as single, head of household, or married filing separately. Free state tax efile 2012 joint return and 2013 separate returns. Free state tax efile    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. Free state tax efile You are filing a separate return if you file as single, head of household, or married filing separately. Free state tax efile   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. Free state tax efile Then multiply the tax on the joint return by the following fraction. Free state tax efile   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. Free state tax efile Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Free state tax efile Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Free state tax efile For 2013, they file married filing separately. Free state tax efile Lisa figures her share of the tax on the 2012 joint return as follows. Free state tax efile 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. Free state tax efile 67% Lisa's part of tax on joint return ($6,484 × 88. Free state tax efile 67%) $ 5,749 Form 2210. Free state tax efile   In most cases, you do not need to file Form 2210. Free state tax efile The IRS will figure the penalty for you and send you a bill. Free state tax efile If you want us to figure the penalty for you, leave the penalty line on your return blank. Free state tax efile Do not file Form 2210. Free state tax efile   To determine if you should file Form 2210, see Part II of Form 2210. Free state tax efile If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. Free state tax efile If you use Form 2210, you cannot file Form 1040EZ. Free state tax efile   On Form 1040, enter the amount of your penalty on line 77. Free state tax efile If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Free state tax efile If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Free state tax efile   On Form 1040A, enter the amount of your penalty on line 46. Free state tax efile If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Free state tax efile If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Free state tax efile Lowering or eliminating the penalty. Free state tax efile    You may be able to lower or eliminate your penalty if you file Form 2210. Free state tax efile You must file Form 2210 with your return if any of the following applies. Free state tax efile You request a waiver. Free state tax efile See Waiver of Penalty , later. Free state tax efile You use the annualized income installment method. Free state tax efile See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Free state tax efile You use your actual withholding for each payment period for estimated tax purposes. Free state tax efile See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Free state tax efile You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. Free state tax efile Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. Free state tax efile Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. Free state tax efile Total tax for 2013. Free state tax efile   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Free state tax efile    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Free state tax efile Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Free state tax efile The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Free state tax efile Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Free state tax efile   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Free state tax efile   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Free state tax efile Note. Free state tax efile When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. Free state tax efile Paid through withholding. Free state tax efile    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Free state tax efile Add to that any write-in amount on line 72 identified as “Form 8689. Free state tax efile ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. Free state tax efile On Form 1040EZ, it is the amount on line 7. Free state tax efile No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Free state tax efile S. Free state tax efile citizen or resident for the whole year. Free state tax efile For this rule to apply, your tax year must have included all 12 months of the year. Free state tax efile You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Free state tax efile Example. Free state tax efile Ray, who is single and 22 years old, was unemployed for a few months during 2012. Free state tax efile He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Free state tax efile He had no other income. Free state tax efile Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). Free state tax efile He filed a return only to have his withheld income tax refunded to him. Free state tax efile In 2013, Ray began regular work as an independent contractor. Free state tax efile Ray made no estimated tax payments in 2013. Free state tax efile Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. Free state tax efile Total tax for 2012. Free state tax efile   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Free state tax efile    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Free state tax efile Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Free state tax efile The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Free state tax efile Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. Free state tax efile   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Free state tax efile   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Free state tax efile Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Free state tax efile If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Free state tax efile Example. Free state tax efile The tax on Lori Lane's 2012 return was $12,400. Free state tax efile Her AGI was not more than $150,000 for either 2012 or 2013. Free state tax efile The tax on her 2013 return (Form 1040, line 55) is $13,044. Free state tax efile Line 56 (self-employment tax) is $8,902. Free state tax efile Her 2013 total tax is $21,946. Free state tax efile For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Free state tax efile 90% of her 2013 tax is $19,751. Free state tax efile Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. Free state tax efile The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. Free state tax efile Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Free state tax efile Different 2012 filing status. Free state tax efile    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. Free state tax efile Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. Free state tax efile If you qualify to use this method, it will result in the same penalty amount as the regular method. Free state tax efile However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Free state tax efile You can use the short method only if you meet one of the following requirements. Free state tax efile You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Free state tax efile You paid the same amount of estimated tax on each of the four payment due dates. Free state tax efile If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. Free state tax efile Note. Free state tax efile If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. Free state tax efile However, if the payment was only a few days early, the difference is likely to be small. Free state tax efile You cannot use the short method if any of the following apply. Free state tax efile You made any estimated tax payments late. Free state tax efile You checked box C or D in Part II of Form 2210. Free state tax efile You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Free state tax efile S. Free state tax efile income tax withholding. Free state tax efile If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Free state tax efile Also, you cannot use your actual withholding during each period to figure your payments for each period. Free state tax efile These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Free state tax efile Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Free state tax efile Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. Free state tax efile You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. Free state tax efile You paid one or more estimated tax payments on a date after the due date. Free state tax efile You paid at least one, but less than four, installments of estimated tax. Free state tax efile You paid estimated tax payments in un- equal amounts. Free state tax efile You use the annualized income installment method to figure your underpayment for each payment period. Free state tax efile You use your actual withholding during each payment period to figure your payments. Free state tax efile Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. Free state tax efile Enter the results on line 27 of Section B. Free state tax efile Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. Free state tax efile Complete lines 20 through 26 of the first column before going to line 20 of the next column. Free state tax efile Required installments—line 18. Free state tax efile   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Free state tax efile This method—the regular method—is the one to use if you received your income evenly throughout the year. Free state tax efile   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Free state tax efile First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Free state tax efile See Annualized Income Installment Method (Schedule AI), later. Free state tax efile Payments made—line 19. Free state tax efile   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. Free state tax efile For special rules for figuring your payments, see Form 2210 instructions for line 19. Free state tax efile   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. Free state tax efile If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. Free state tax efile Actual withholding method. Free state tax efile    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Free state tax efile You can make this choice separately for the tax withheld from your wages and for all other withholding. Free state tax efile This includes any excess social security and tier 1 RRTA tax withheld. Free state tax efile   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Free state tax efile   If you use your actual withholding, you must check box D in Form 2210, Part II. Free state tax efile Then complete Form 2210 using the regular method (Part IV) and file it with your return. Free state tax efile Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. Free state tax efile The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. Free state tax efile For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. Free state tax efile A 3% rate applies to all four periods. Free state tax efile Payments. Free state tax efile    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. Free state tax efile For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Free state tax efile You can use the table in the Form 2210 instructions to make your list. Free state tax efile Follow those instructions for listing income tax withheld and payments made with your return. Free state tax efile Use the list to determine when each underpayment was paid. Free state tax efile   If you mail your estimated tax payments, use the date of the U. Free state tax efile S. Free state tax efile postmark as the date of payment. Free state tax efile Line 1b. Free state tax efile   Apply the payments listed to underpayment balance in the first column until it is fully paid. Free state tax efile Apply payments in the order made. Free state tax efile Figuring the penalty. Free state tax efile   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Free state tax efile On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. Free state tax efile On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Free state tax efile If no payments are applied, figure the penalty on the amount on line 1a. Free state tax efile Aid for counting days. Free state tax efile    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Free state tax efile Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. Free state tax efile In the same manner, find the number for the date the payment was made. Free state tax efile Subtract the due date “number” from the payment date “number. Free state tax efile ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. Free state tax efile Table 4-1. Free state tax efile Calendar To Determine the Number of Days a Payment Is Late Instructions. Free state tax efile Use this table with Form 2210 if you are completing Part IV, Section B. Free state tax efile First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Free state tax efile Then, in the same manner, find the number for the date the payment was made. Free state tax efile Finally, subtract the due date number from the payment date number. Free state tax efile The result is the number of days the payment is late. Free state tax efile Example. Free state tax efile The payment due date is June 15 (61). Free state tax efile The payment was made on November 4 (203). Free state tax efile The payment is 142 days late (203 – 61). Free state tax efile Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Free state tax efile Sept. Free state tax efile Oct. Free state tax efile Nov. Free state tax efile Dec. Free state tax efile Jan. Free state tax efile Feb. Free state tax efile Mar. Free state tax efile Apr. Free state tax efile 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Free state tax efile Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. Free state tax efile To figure your underpayment using this method, complete Form 2210, Schedule AI. Free state tax efile Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Free state tax efile If you use the annualized income installment method, you must check box C in Part II of Form 2210. Free state tax efile Also, you must attach Form 2210 and Schedule AI to your return. Free state tax efile If you use Schedule AI for any payment due date, you must use it for all payment due dates. Free state tax efile Completing Schedule AI. Free state tax efile   Follow the Form 2210 instructions to complete Schedule AI. Free state tax efile For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Free state tax efile If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. Free state tax efile Note. Free state tax efile Each period includes amounts from the previous period(s). Free state tax efile Period (a) includes items for January 1 through March 31. Free state tax efile Period (b) includes items for January 1 through May 31. Free state tax efile Period (c) includes items for January 1 through August 31. Free state tax efile Period (d) includes items for the entire year. Free state tax efile Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Free state tax efile The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. Free state tax efile If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. Free state tax efile Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Free state tax efile The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. Free state tax efile Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . Free state tax efile See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Free state tax efile Form 2210-F. Free state tax efile   Use Form 2210-F to figure any underpayment penalty. Free state tax efile Do not attach it to your return unless you check a box in Part I. Free state tax efile However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Free state tax efile Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. Free state tax efile Keep your filled-in Form 2210-F for your records. Free state tax efile    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. Free state tax efile Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Free state tax efile You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Free state tax efile You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Free state tax efile You had a reasonable cause for not making the payment. Free state tax efile Your underpayment was not due to willful neglect. Free state tax efile How to request a waiver. Free state tax efile   To request a waiver, see the Instructions for Form 2210. Free state tax efile Farmers and fishermen. Free state tax efile   To request a waiver, see the Instructions for Form 2210-F. Free state tax efile Federally declared disaster. Free state tax efile   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. Free state tax efile During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Free state tax efile Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Free state tax efile If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Free state tax efile   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. Free state tax efile Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Free state tax efile If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. Free state tax efile   Details on the applicable disaster postponement period can be found at IRS. Free state tax efile gov. Free state tax efile Enter Tax Relief in Disaster Situations. Free state tax efile Select the federally declared disaster that affected you. Free state tax efile    Worksheet 4-1. Free state tax efile 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Free state tax efile To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. Free state tax efile                   1. Free state tax efile Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Free state tax efile       2. Free state tax efile Enter your annualized qualified dividends for the period 2. Free state tax efile           3. Free state tax efile Are you filing Schedule D?               □ Yes. Free state tax efile Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Free state tax efile If either line 15 or line 16 is blank or a loss, enter -0-. Free state tax efile 3. Free state tax efile             □ No. Free state tax efile Enter your annualized capital gain distributions from Form 1040, line 13             4. Free state tax efile Add lines 2 and 3   4. Free state tax efile           5. Free state tax efile If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Free state tax efile Otherwise, enter -0-   5. Free state tax efile           6. Free state tax efile Subtract line 5 from line 4. Free state tax efile If zero or less, enter -0- 6. Free state tax efile       7. Free state tax efile Subtract line 6 from line 1. Free state tax efile If zero or less, enter -0- 7. Free state tax efile       8. Free state tax efile Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. Free state tax efile 8. Free state tax efile       9. Free state tax efile Enter the smaller of line 1 or line 8 9. Free state tax efile       10. Free state tax efile Enter the smaller of line 7 or line 9 10. Free state tax efile       11. Free state tax efile Subtract line 10 from line 9. Free state tax efile This amount is taxed at 0% 11. Free state tax efile       12. Free state tax efile Enter the smaller of line 1 or line 6 12. Free state tax efile       13. Free state tax efile Enter the amount from line 11 13. Free state tax efile       14. Free state tax efile Subtract line 13 from line 12 14. Free state tax efile       15. Free state tax efile Multiply line 14 by 15% (. Free state tax efile 15) 15. Free state tax efile   16. Free state tax efile Figure the tax on the amount on line 7. Free state tax efile If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Free state tax efile If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Free state tax efile   17. Free state tax efile Add lines 15 and 16 17. Free state tax efile   18. Free state tax efile Figure the tax on the amount on line 1. Free state tax efile If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Free state tax efile If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Free state tax efile   19. Free state tax efile Tax on all taxable income. Free state tax efile Enter the smaller of line 17 or line 18. Free state tax efile Also enter this amount on line 12 of Schedule AI in the appropriate column. Free state tax efile However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. Free state tax efile   Worksheet 4-2. Free state tax efile 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. Free state tax efile             1. Free state tax efile Enter the amount from line 11 of Schedule AI for the period 1. Free state tax efile   2. Free state tax efile Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. Free state tax efile   3. Free state tax efile Add lines 1 and 2 3. Free state tax efile   4. Free state tax efile Tax on the amount on line 3. Free state tax efile Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Free state tax efile See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Free state tax efile (Note. Free state tax efile You do not have to use the same method for each period on Schedule AI. Free state tax efile ) 4. Free state tax efile   5. Free state tax efile Tax on the amount on line 2. Free state tax efile If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Free state tax efile If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Free state tax efile   6. Free state tax efile Subtract line 5 from line 4. Free state tax efile Enter the result here and on line 12 of Schedule AI. Free state tax efile If zero or less,  enter -0- 6. Free state tax efile             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. Free state tax efile     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. Free state tax efile If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Free state tax efile Complete the rest of Form 8615 according to its instructions. Free state tax efile Then complete lines 5 and 6 above. Free state tax efile     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Free state tax efile Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Free state tax efile Next, determine if you have a capital gain excess. Free state tax efile     Figuring capital gain excess. Free state tax efile To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). Free state tax efile If the result is more than zero, that amount is your capital gain excess. Free state tax efile     No capital gain excess. Free state tax efile If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Free state tax efile Then complete lines 5 and 6 above. Free state tax efile     Capital gain excess. Free state tax efile If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Free state tax efile Then complete lines 5 and 6 above. Free state tax efile     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Free state tax efile     a. Free state tax efile Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. Free state tax efile     b. Free state tax efile Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. Free state tax efile     c. Free state tax efile Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Free state tax efile     d. Free state tax efile Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). 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The Free State Tax Efile

Free state tax efile 12. Free state tax efile   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. Free state tax efile Name change. Free state tax efile Penalty for underpayment of estimated tax. Free state tax efile Who Must Pay Self-Employment Tax?Limited partner. Free state tax efile Community property. Free state tax efile Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. Free state tax efile  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Free state tax efile 4% to 12. Free state tax efile 4%. Free state tax efile The Medicare part of the tax remains at 2. Free state tax efile 9%. Free state tax efile As a result, the self-employment tax is increased from 13. Free state tax efile 3% to 15. Free state tax efile 3%. Free state tax efile Additional Medicare Tax. Free state tax efile . Free state tax efile  For tax years beginning in 2013, a 0. Free state tax efile 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Free state tax efile Use Form 8959, Additional Medicare Tax, to figure this tax. Free state tax efile For more information, see the Instructions for Form 8959. Free state tax efile Maximum net earnings. Free state tax efile  The maximum net self-employment earnings subject to the social security part (12. Free state tax efile 4%) of the self-employment tax increased to $113,700 for 2013. Free state tax efile There is no maximum limit on earnings subject to the Medicare part (2. Free state tax efile 9%). Free state tax efile What's New for 2014 Maximum net earnings. Free state tax efile  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. Free state tax efile Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Free state tax efile It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Free state tax efile You usually have to pay SE tax if you are self-employed. Free state tax efile You are usually self-employed if you operate your own farm on land you either own or rent. Free state tax efile You have to figure SE tax on Schedule SE (Form 1040). Free state tax efile Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Free state tax efile See chapter 13 for information on employment taxes. Free state tax efile Self-employment tax rate. Free state tax efile   For tax years beginning in 2013, the self-employment tax rate is 15. Free state tax efile 3%. Free state tax efile The rate consists of two parts: 12. Free state tax efile 4% for social security (old-age, survivors, and disability insurance) and 2. Free state tax efile 9% for Medicare (hospital insurance). Free state tax efile Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. Free state tax efile S. Free state tax efile Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Free state tax efile S. Free state tax efile Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Free state tax efile See chapter 16 for information about getting publications and forms. Free state tax efile Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Free state tax efile Your payments of SE tax contribute to your coverage under the social security system. Free state tax efile Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Free state tax efile How to become insured under social security. Free state tax efile   You must be insured under the social security system before you begin receiving social security benefits. Free state tax efile You are insured if you have the required number of credits (also called quarters of coverage). Free state tax efile Earning credits in 2013. Free state tax efile   You can earn a maximum of four credits per year. Free state tax efile For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Free state tax efile You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. Free state tax efile It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Free state tax efile For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at www. Free state tax efile socialsecurity. Free state tax efile gov. Free state tax efile Making false statements to get or to increase social security benefits may subject you to penalties. Free state tax efile The Social Security Administration (SSA) time limit for posting self-employment earnings. Free state tax efile   Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Free state tax efile    If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. Free state tax efile The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Free state tax efile How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). Free state tax efile This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Free state tax efile An ITIN does not entitle you to social security benefits. Free state tax efile Obtaining an ITIN does not change your immigration or employment status under U. Free state tax efile S. Free state tax efile law. Free state tax efile Obtaining a social security number. Free state tax efile   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Free state tax efile The application is also available in Spanish. Free state tax efile You can get this form at any Social Security office or by calling 1-800-772-1213. Free state tax efile    You can also download Form SS-5 from the Social Security Administration website at  www. Free state tax efile socialsecurity. Free state tax efile gov. Free state tax efile   If you have a social security number from the time you were an employee, you must use that number. Free state tax efile Do not apply for a new one. Free state tax efile Replacing a lost social security card. Free state tax efile   If you have a number but lost your card, file Form SS-5. Free state tax efile You will get a new card showing your original number, not a new number. Free state tax efile Name change. Free state tax efile   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Free state tax efile Obtaining an individual taxpayer identification number. Free state tax efile   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. Free state tax efile To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Free state tax efile You can get this form by calling 1-800-829-3676. Free state tax efile For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Free state tax efile Form W-7 and Publication 1915 are also available in Spanish. Free state tax efile    You can also download Form W-7 from the IRS website at IRS. Free state tax efile gov. Free state tax efile Paying estimated tax. Free state tax efile   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Free state tax efile You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. Free state tax efile Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Free state tax efile   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. Free state tax efile For more information about estimated tax for farmers, see chapter 15. Free state tax efile Penalty for underpayment of estimated tax. Free state tax efile   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Free state tax efile Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Free state tax efile The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Free state tax efile Aliens. Free state tax efile   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Free state tax efile S. Free state tax efile citizens. Free state tax efile Nonresident aliens are not subject to self-employment tax. Free state tax efile However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. Free state tax efile S. Free state tax efile residents for self-employment tax purposes. Free state tax efile For more information on aliens, see Publication 519, U. Free state tax efile S. Free state tax efile Tax Guide for Aliens. Free state tax efile Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. Free state tax efile A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Free state tax efile Share farmer. Free state tax efile   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Free state tax efile You produce a crop or raise livestock on land belonging to another person. Free state tax efile Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Free state tax efile Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. Free state tax efile   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. Free state tax efile This will depend on whether the landowner has the right to direct or control your performance of services. Free state tax efile Example. Free state tax efile A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Free state tax efile Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Free state tax efile The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Free state tax efile The share farmer is provided a house in which to live. Free state tax efile The landowner and the share farmer decide on a cropping plan. Free state tax efile The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. Free state tax efile The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Free state tax efile Contract farming. Free state tax efile   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. Free state tax efile Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. Free state tax efile 4-H Club or FFA project. Free state tax efile   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. Free state tax efile Report the net income as “Other income” on line 21 of Form 1040. Free state tax efile If necessary, attach a statement showing the gross income and expenses. Free state tax efile The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. Free state tax efile Such a project is generally not considered a trade or business. Free state tax efile Partners in a partnership. Free state tax efile   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Free state tax efile Limited partner. Free state tax efile   If you are a limited partner, your partnership income is generally not subject to SE tax. Free state tax efile However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). Free state tax efile Business Owned and Operated by Spouses. Free state tax efile   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. Free state tax efile You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Free state tax efile Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Free state tax efile Qualified joint venture. Free state tax efile   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Free state tax efile For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Free state tax efile   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Free state tax efile Each of you must file a separate Schedule F and a separate Schedule SE. Free state tax efile For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Free state tax efile Spouse employee. Free state tax efile   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Free state tax efile For more information about employment taxes, see chapter 13. Free state tax efile Community property. Free state tax efile   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. Free state tax efile Do not treat any of your share as self-employment earnings of your spouse. Free state tax efile Figuring Self-Employment Earnings Farmer. Free state tax efile   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Free state tax efile Partnership income or loss. Free state tax efile   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). Free state tax efile Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Free state tax efile Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). Free state tax efile   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. Free state tax efile   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Free state tax efile   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Free state tax efile   For general information on partnerships, see Publication 541. Free state tax efile More than one business. Free state tax efile   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. Free state tax efile A loss from one business reduces your profit from another business. Free state tax efile However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. Free state tax efile Community property. Free state tax efile   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. Free state tax efile Lost income payments. Free state tax efile   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Free state tax efile These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Free state tax efile Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). Free state tax efile A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Free state tax efile Gain or loss. Free state tax efile   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. Free state tax efile It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Free state tax efile For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Free state tax efile Investment property. Free state tax efile Depreciable property or other fixed assets used in your trade or business. Free state tax efile Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. Free state tax efile Unharvested standing crops sold with land held more than 1 year. Free state tax efile Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. Free state tax efile   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. Free state tax efile For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Free state tax efile Wages and salaries. Free state tax efile   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. Free state tax efile   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Free state tax efile Retired partner. Free state tax efile   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. Free state tax efile The retired partner performs no services for the partnership during the year. Free state tax efile The retired partner is owed only the retirement payments. Free state tax efile The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Free state tax efile The payments to the retired partner are lifelong periodic payments. Free state tax efile Conservation Reserve Program (CRP) payments. Free state tax efile   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. Free state tax efile You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Free state tax efile Cost share payments you receive may qualify for the costsharing exclusion. Free state tax efile See Cost-Sharing Exclusion (Improvements), above. Free state tax efile CRP payments are reported to you on Form 1099G. Free state tax efile Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Free state tax efile See the instructions for Schedule SE (Form 1040). Free state tax efile Self-employed health insurance deduction. Free state tax efile   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). Free state tax efile Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. Free state tax efile However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. Free state tax efile Crop shares. Free state tax efile   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. Free state tax efile Feeding such crop shares to livestock is considered using them. Free state tax efile Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Free state tax efile Material participation for landlords. Free state tax efile   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Free state tax efile You do at least three of the following. Free state tax efile Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Free state tax efile Furnish at least half the tools, equipment, and livestock used in the production activities. Free state tax efile Advise or consult with your tenant. Free state tax efile Inspect the production activities periodically. Free state tax efile You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Free state tax efile You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Free state tax efile You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Free state tax efile These tests may be used as general guides for determining whether you are a material participant. Free state tax efile Example. Free state tax efile Drew Houston agrees to produce a crop on J. Free state tax efile Clarke's cotton farm, with each receiving half the proceeds. Free state tax efile Clarke advises Houston when to plant, spray, and pick the cotton. Free state tax efile During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Free state tax efile Houston furnishes all labor needed to grow and harvest the crop. Free state tax efile The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. Free state tax efile The income Clarke receives from his cotton farm is included in his self-employment earnings. Free state tax efile Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Free state tax efile The regular method. Free state tax efile The farm optional method. Free state tax efile The nonfarm optional method. Free state tax efile You must use the regular method unless you are eligible to use one or both of the optional methods. Free state tax efile See Figure 12-1 , shown later. Free state tax efile Figure 12-1. Free state tax efile Can I Use the Optional Methods? Please click here for the text description of the image. Free state tax efile Figure 12–1. Free state tax efile Can I Use the Optional Methods? Why use an optional method?   You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. Free state tax efile You want to receive credit for social security benefit coverage. Free state tax efile You incurred child or dependent care expenses for which you could claim a credit. Free state tax efile (An optional method may increase your earned income, which could increase your credit. Free state tax efile ) You are entitled to the earned income credit. Free state tax efile (An optional method may increase your earned income, which could increase your credit. Free state tax efile ) You are entitled to the additional child tax credit. Free state tax efile (An optional method may increase your earned income, which could increase your credit. Free state tax efile ) Effects of using an optional method. Free state tax efile   Using an optional method could increase your SE tax. Free state tax efile Paying more SE tax may result in you getting higher social security disability or retirement benefits. Free state tax efile   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller SE tax or no SE tax using the regular method. Free state tax efile   The optional methods may be used only to figure your SE tax. Free state tax efile To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Free state tax efile Regular Method Multiply your total self-employment earnings by 92. Free state tax efile 35% (. Free state tax efile 9235) to get your net earnings under the regular method. Free state tax efile See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Free state tax efile Net earnings figured using the regular method are also called “actual net earnings. Free state tax efile ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Free state tax efile You can use this method if you meet either of the following tests. Free state tax efile Your gross farm income is $6,960 or less. Free state tax efile Your net farm profits are less than $5,024. Free state tax efile Gross farm income. Free state tax efile   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). Free state tax efile Net farm profits. Free state tax efile   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). Free state tax efile However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. Free state tax efile For more information, see Partnership income or loss , earlier. Free state tax efile Figuring farm net earnings. Free state tax efile   If you meet either of the two tests explained above, use Table 12-1. Free state tax efile Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Free state tax efile Table 12-1. Free state tax efile Figuring Farm Net Earnings IF your gross farm income  is. Free state tax efile . Free state tax efile . Free state tax efile THEN your net earnings are equal to. Free state tax efile . Free state tax efile . Free state tax efile $6,960 or less Two-thirds of your gross farm income. Free state tax efile More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Free state tax efile   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. Free state tax efile Your actual net earnings are your net earnings figured using the regular method, explained earlier. Free state tax efile Example. Free state tax efile Your gross farm income is $540 and your net farm profit is $460. Free state tax efile Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Free state tax efile 35% of $460). Free state tax efile You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Free state tax efile Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Free state tax efile If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Free state tax efile You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. Free state tax efile For more information about the nonfarm optional method, see Publication 334. Free state tax efile You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Free state tax efile Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. Free state tax efile You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Free state tax efile If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Free state tax efile Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Free state tax efile Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Free state tax efile Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Free state tax efile However, certain taxpayers must use Section B–Long Schedule SE. Free state tax efile Use the chart on page 1 of Schedule SE to find out which one to use. Free state tax efile If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. Free state tax efile Deduction for employer-equivalent portion of self-employment tax. Free state tax efile   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Free state tax efile This deduction only affects your income tax. Free state tax efile It does not affect either your net earnings from self-employment or your SE tax. Free state tax efile   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. Free state tax efile Joint return. Free state tax efile   Even if you file a joint return, you cannot file a joint Schedule SE. Free state tax efile This is true whether one spouse or both spouses have self-employment earnings. Free state tax efile Your spouse is not considered self-employed just because you are. Free state tax efile If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Free state tax efile However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. Free state tax efile Attach both schedules to the joint return. Free state tax efile If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . Free state tax efile Prev  Up  Next   Home   More Online Publications