DRS: IP 93(6.1), A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040AES

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Information Publication has been obsoleted and superseded by IP 99(33)

IP 93(6.1)

A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040AES


PURPOSE: This publication explains an alternative method for calculating installments of estimated Connecticut income tax. If your income is not received evenly throughout the year (because of a seasonal business or for any other reason), you may benefit by using this method. If you use the annualized estimated income tax installment method, your required installment for one or more periods may be less than the amount of the installment calculated using the regular installment method.


WHO SHOULD PAY ESTIMATED TAX? In general, if you expect to owe, after subtracting Connecticut tax withheld, more than $200 and you expect your Connecticut income tax withheld to be less than your required annual payment, you should make estimated payments.


WHAT IS MY REQUIRED ANNUAL PAYMENT? Your required annual payment is the lesser of :

  • 90% of your total Connecticut income tax for the current taxable year, or
  • 100% of your total Connecticut income tax for the preceding taxable year, if you filed a Connecticut income tax return for the preceding taxable year that covered a 12-month period.

NOTE: You do not have to make estimated income tax payments if you did not file a Connecticut income tax return for the preceding taxable year because you had no Connecticut income tax liability and you were either:

  • a resident of Connecticut for the entire preceding taxable year, or
  • a nonresident or part-year resident of Connecticut with Connecticut source income.

HOW MUCH IS DUE WITH EACH INSTALLMENT? In general, a taxpayer must pay the required annual payment in 4 equal installments of 25% each. However, if the taxpayer does not receive income evenly throughout the year, because of a seasonal business or for any other reason, the taxpayer may benefit from using the annualized income installment method. If this method is used, the size of the installments may vary, depending upon the amount of income earned during the period preceding the due date of each installment. A taxpayer using this method may be able to reduce or eliminate one or more payments for periods when his or her income is low but will make larger payments for the remaining periods when income is higher.


HOW DO I CALCULATE THE AMOUNT OF EACH INSTALLMENT USING THE ANNUALIZED ESTIMATED INCOME TAX INSTALLMENT METHOD?  First complete the worksheet to Form CT-1040ES, Individual Estimated Income Tax Payment Coupon, to calculate your required annual payment. ( You can also use this worksheet to determine your installment payments if you are required to use the regular installment method.) Next, complete Worksheet CT-1040AES, included in this publication, to calculate the amount of each installment using the annualized estimated income tax installment method.


HOW DO I PAY MY ESTIMATED TAX?  Each payment of estimated tax must be accompanied by a coupon from Form CT-1040ES, Individual Estimated Income Tax Payment Coupon. If you made estimated payments of Connecticut income tax last year, you will receive an individual estimated tax payment coupon book by mail in January. The coupons are preprinted with your name, address and social security number to ensure that  your payments are properly credited. If you did not make estimated payments last year, use Form CT-1040ES included in your Connecticut income tax booklet or available from the department's Forms Unit to make your first payment. If you file this form, additional coupons will be mailed to you.


WHAT HAPPENS IF I UNDERESTIMATE MY TAX?  If you are required to make estimated income tax payments and you do not pay enough tax during the year through estimated tax and withholding or if you do not make estimated payments on time, interest will be charged. Interest is calculated separately on each installment from the due date to the date when the underpayment is paid in full. (You may owe interest for an earlier installment even if you paid enough to make up the underpayment with a later installment.) 


WILL INTEREST APPLY IF I USE THE ANNUALIZED ESTIMATED INCOME TAX INSTALLMENT METHOD?  Interest will not apply if you correctly calculate the required installments by completing worksheet CT-1040AES, included with this publication, and you make the required installment payments (using Form CT-1040ES) on or before the due date.

NOTE: If your estimated installment payments are based on the annualized income installment method, you must attach to your income tax return, Form CT-2210, Underpayment of Estimated Income Tax by Individuals and Fiduciaries, to show that you  are not underpaid and are not subject to interest charges.


MAY I APPLY OVERPAYMENTS IN THE PRIOR YEAR TO THE NEXT YEAR'S ESTIMATE?  When you file a final return for the year, you may request that overpayments of Connecticut income tax be applied to your next year's estimated tax. If you file your Connecticut income tax return on or before April 15 (or if you file a timely request for extension of time to file and your income tax return is filed within the extension period) the overpayment will be treated as an estimate filed on April 15.


EFFECT ON OTHER DOCUMENTS:  IP 93(6.1) is effective for taxable years beginning on or after January 1, 1995 and replaces IP 93(6).


RELATED FORMS AND PUBLICATIONS:

Form CT-1040ES, Individual Estimated Income Tax Coupon

IP 92(5.3), Estimated Connecticut Income Tax


For Further Information on Connecticut Taxes:  Please call the Department of Revenue Services during business hours, Monday through Friday:

  • 1-800-382-9463 (toll-free from within Connecticut), or
  • 860-297-5962 (anywhere).
  • TTY, TDD and Text Telephone users only may transmit inquiries 24 hours a day by calling 860-297-4911.

Forms and Publications: Forms and publications are available all day, seven days a week:

  • Internet: preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs; or
  • Telephone: Call 1-800-382-9463 (toll-free from within Connecticut) or 860-297-5962 (anywhere) and select Option 2 from a touch-tone phone.

INSTRUCTIONS FOR WORKSHEET CT-1040AES: Before you begin, be sure you have a copy of Form CT-1040ES, Individual Estimated Income Tax Payment Coupon. You will need the worksheet to assist you in calculating your Connecticut adjusted gross income, your estimated tax due, and your required annual payment. You will also need the coupon for making your installment payment. 

After the end of each payment period, complete the column on Worksheet CT-1040AES for the period from the beginning of the taxable year through the end of that payment period to figure how much estimated tax to pay by the payment due date. (For calendar year filers, the payment periods are listed at the top of each column of the worksheet. Fiscal year filers, use the same payment periods required for federal income tax purposes.)

Line 1. Figure your total income for the period plus or minus your adjustments to income for the period. (See instructions for Form CT-1040ES, Lines 1, 2, and 3, for guidance in figuring your Connecticut adjusted gross income. Nonresidents and Part-Year residents, be sure to follow the directions included in the NOTE to Line 3, Form CT-1040ES. )

Line 4. Use the Tax Calculation Schedule or the Tax Tables to figure the tax due on the annualized income amount stated on Line 3. ( Follow the directions included in Form CT-1040ES, Line 4 for further assistance.)

Line 5. RESIDENTS AND PART-YEAR RESIDENTS ONLY: Enter your allowable net credit for income taxes paid to other jurisdictions. (Follow the instructions to Schedule 2, Form CT-1040 or Form CT-1040NR/PY to calculate the credit.)

Line 6. NONRESIDENTS AND PART-YEAR RESIDENTS ONLY: Complete the following calculation if your Connecticut source income is less than your Connecticut adjusted gross income and enter the result on Line 6. All other taxpayers should subtract line 5 from line 4 and enter the result on line 6. (line 4 - line 5) x Income from Connecticut Sources = line 6 Connecticut adjusted gross income

Line 7. If you expect to owe federal alternative minimum tax, you may also owe Connecticut alternative minimum tax. Enter your estimated Connecticut alternative minimum tax liability for each period. (See instructions for Form CT-6251, Connecticut Alternative Minimum Tax Return, for instructions on figuring this tax.)

Line 19. Include all estimated tax payments and withholding through the payment due date for the period.

Your withholding is considered paid in four equal installments, one on the due date of each payment period. To figure the amount to include on line 19 for each period, multiply your total expected withholding for the taxable year:

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

You may also choose to include your actual withholding through the due date for each period on line 19.

(See example worksheet CT-1040AES on the last page of this publication.)

WORKSHEET CT-1040AES
Connecticut Annualized Estimated Tax Worksheet

(Keep for your records)
Complete each column after the end of each payment period shown.

(a)
(b)
(c)
(d)

January 1 to March 31
January 1 to May 31
January 1 to August 31
January 1 to December 31

1. Enter your Connecticut Adjusted Gross Income for each period. (see instructions)

2. Annualized amounts.

4
2.4
1.5
1

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

4. Enter the tax due on the amount on line 3. (see instructions)

5. Credit for tax paid to another jurisdiction - Residents and Part-Year Residents only. (see instructions)

6. Connecticut Income Tax. (subtract line 5 from line 4) (Nonresidents and Part-year Residents ONLY, see instructions.)

7. Connecticut Alternative Minimum Tax. (see instructions)

8. Total annualized tax. (add lines 6 and 7)

9. Applicable percentages.

0.225
0.45
0.675
0.90

10. Multiply line 8 by line 9.

11. Add the amounts in all preceding columns of line 17.

12. Annualized Income Installment. Subtract line 11 from line 10. If - 0 - or less, enter - 0 - .

13. Enter 25% of your Required Annual Payment, from the worksheet of Form CT-1040ES, in each column.

14. Enter amount from line 16 of the preceding column of this Schedule.

15. Add lines 13 and 14 and enter the total.

16. If line 15 is more than line 12, subtract line 12 from line 15, otherwise enter - 0 - .

17. Enter the smaller of line 12 or line 15.

18. Total required payments for the period. (add lines 11 and 17)

19. Withholding and estimated tax payments through the due date for the period. (see instructions)

20. Estimated tax payment required by the next due date. Subtract line 19 from line 18 and enter the result (but not less than - 0 -).


EXAMPLE FOR ANNUALIZED ESTIMATED TAX:

Michael Smith is a single, resident taxpayer. He filed a Connecticut income tax return for the preceding taxable year, reporting a Connecticut income tax liability of $2,249.

During the current taxable year, Mr. Smith does not expect to receive his income evenly throughout the year. After completing his Form CT-1040ES, Individual Estimated Income Tax Payment Coupon, he decides to use the annualized estimated income tax installment method. His required annual payment from Form CT-1040ES worksheet is $2249.00.

His only income is from a business. His net profit from his business is received as follows:

$15,000 January through March
5,000 April through May
5,000 June through August
50,000 September through December
$75,000 Total

(See below for the completed Worksheet CT-1040AES for this example showing Michael Smith's required installment payments for each period.)

WORKSHEET CT-1040AES
Connecticut Annualized Estimated Tax Worksheet
Complete each column after the end of each payment period shown.

(a)
(b)
(c)
(d)

January 1 to March 31
January 1 to May 31
January 1 to August 31
January 1 to December 31

1. Enter your Connecticut Adjusted Gross Income for each period. (see instructions)

15,000
20,000
25,000
75,000

2. Annualized amounts.

4
2.4
1.5
1

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

60,000
48,000
37,500
75,000

4. Enter the tax due on the amount on line 3. (see instructions)

2,700
1,944
1,519
3,375

5. Credit for tax paid to another jurisdiction - Residents and Part-Year Residents only. (see instructions)

6. Connecticut Income Tax. (subtract line 5 from line 4) (Nonresidents and Part-year Residents ONLY, see instructions.)

2,700
1,944
1,519
3,375

7. Connecticut Alternative Minimum Tax. (see instructions)

8. Total annualized tax. (add lines 6 and 7)

2,700
1,944
1,519
3,375

9. Applicable percentages.

0.225
0.45
0.675
0.90

10. Multiply line 8 by line 9.

607.50
874.80
1,025.33
3,037.50

11. Add the amounts in all preceding columns of line 17.

562.25
874.80
1,025.33

12. Annualized Income Installment. Subtract line 11 from line 10. If - 0 - or less, enter - 0 -.

607.50
312.55
150.53
2,012.17

13. Enter 25% of your Required Annual Payment, from the worksheet of Form CT-1040ES, in each column.

562.25
562.25
562.25
562.25

14. Enter amount from line 16 of the preceding column of this Schedule.

0
249.70
661.42

15. Add lines 13 and 14 and enter the total.

562.25
562.25
811.95
1223.67

16. If line 15 is more than line 12, subtract line 12 from line 15, otherwise enter - 0 - .

0
249.70
661.42
0

17. Enter the smaller of line 12 or line 15.

562.25
312.55
150.53
1,223.67

18. Total required payments for the period. (add lines 11 and 17)

562.25
874.80
1,025.33
2,249.00

19. Withholding and estimated tax payments through the due date for the period. (see
instructions)

0
562.25
874.80
1,025.13

20. Estimated tax payment required by the next due date. Subtract line 19 from line 18 and enter the result (but not less than - 0 -).

562.25
312.55
150.53
1,223.87


IP 93(6.1)
Income Tax
Issued: 9/14/94
Replaces IP 92(6), issued 12/21/93