DRS: IP 93(6.4), 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This Information Publication has been obsoleted and superseded by IP 99(33)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(6.4)

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 $500 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 the income tax shown on your Connecticut income tax return for the current taxable year, or
  • 100% of the income tax shown on your Connecticut income tax return 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.

WHEN SHOULD I FILE?

Estimated payments for the 1998 taxable year are due April 15, June 15, September 15, 1998 and January 15, 1999. (Fiscal year filers should follow federal filing dates.) If any due date falls on a Saturday, Sunday or legal holiday, the next business day is the due date.


HOW MUCH IS DUE WITH EACH INSTALLMENT?

In general, a taxpayer must pay the required annual payment in four 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 individual estimated tax payment coupons 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. (See  Related Forms and Publications) 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.)

NOTE: If, on or before January 31st of the following taxable year, you file your return for the taxable year and pay in full the amount computed on the return as payable, no interest will be imposed if you fail to pay or you underpay your fourth required installment. Farmers and Fishermen: See IP 97(8.1), Farmers' Guide to Sales and Use and Estimated Income Taxes, for special estimated income tax rules.


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 check Box D, Part I, Form CT-2210, Underpayment of Estimated Income Tax by Individuals, Trusts and Estates, attach it to your income tax return, and check the Form CT-2210 box located on your Connecticut income tax return below the Name and Address section. By following this procedure, you will notify the Department that your estimated income tax is not underpaid and is not subject to interest charges.


MAY I APPLY OVERPAYMENTS IN THE PRIOR YEAR TO THE NEXT YEAR’S ESTIMATED TAX?

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. Your request to apply overpayments to next year's estimated tax is irrevocable.


EFFECT ON OTHER DOCUMENTS: IP 93(6.4) is effective for taxable years beginning on or after January 1, 1998 and modifies and supersedes IP 93(6.3).


RELATED FORMS AND PUBLICATIONS:

Request the most recent edition of the following publications and forms:

  • Form CT-1040ES, Individual Estimated Income Tax Coupon
  • IP 92(5.7), Estimated Connecticut Income Tax
  • IP 97(8.1), Farmers' Guide to Sales and Use and Estimated Income Taxes

FOR FURTHER INFORMATION: If you have questions about Connecticut taxes, please call the Department of Revenue Services during business hours, Monday through Friday:

  • 860-297-5962 (Hartford calling area or from out-of- state); or
  • 1-800-382-9463 (toll-free from within Connecticut)

Telecommunications Device for the Deaf (TDD/TT) users only, please call 860-297-4911 during business hours.


FORMS AND PUBLICATIONS:

You may obtain forms and publications at any hour, seven days a week:

  • Telephone: use the phone numbers listed above and select Option 3 from a touch-tone phone;
  • Internet: preview and download forms from the DRS Web Site: http://www.ct.gov/drs;

 

EXAMPLE FOR ANNUALIZED ESTIMATED TAX:

Tonia Gonzalez is an unmarried, resident individual. She filed a Connecticut income tax return for the 1997 taxable year, reporting a Connecticut income tax liability of $2,179.00.

During the 1998 taxable year, Ms. Gonzalez does not expect to receive her income evenly throughout the year. After completing her Form CT-1040ES, Individual Estimated Income Tax Payment Coupon, she decides to use the annualized estimated income tax installment method. Her required annual payment from Form CT-1040ES worksheet is $2,179.00.

Her only income is from a Connecticut business of which she is the sole proprietor. Her net profit from her business is received as follows:

$20,000 January through March
5,000 April through May
5,000 June through August
40,000 September through December

$70,000

 

TOTAL

(View completed Worksheet CT-1040AES for this example showing Tonia Gonzalez’s required installment payments for each period.)


WORKSHEET CT-1040AES

Sample Connecticut Annualized Estimated Tax Worksheet
(This worksheet is the basis for the example shown below.)

Complete each column after the end of each payment period shown.

NOTE: Estates and trusts, do not use the period ending dates shown to the right. Instead, use the following: 2/28/98, 4/30/98, 7/31/98 and 11/30/98.

(a)
January 1
to
March 31

(b)
January 1
to
May 31

(c)
January 1
to
August 31

(d)
January 1
to
December 31

1. Enter your Connecticut Adjusted Gross Income for each period. (See instructions)        
2. Annualized amounts (Estates and trusts, see instructions).        
3. Annualized Connecticut adjusted gross income. Multiply Line 1 by Line 2.        
4. Enter the tax due on the amount on Line 3. (See instructions)        
5. Net Credit for income taxes paid to other jurisdictions - Residents and Part-year Residents only (See instructions).        
6. Subtract Line 5 from Line 4.        
7. Connecticut Alternative Minimum Tax (See instructions).        
8. Add Line 6 and Line 7.        
9. Adjusted Net Connecticut Minimum Tax Credit (See instructions).        
10. Total annualized income tax. Subtract Line 9 from 8.        
11. Applicable percentages.        
12. Multiply Line 10 by Line 11.        
13. Add the amounts in all preceding columns of Line 19.        
14. Annualized Income Installment. Subtract Line 13 from Line 12. (If zero or less, enter 0.)        
15. Enter 25% of your Required Annual Payment. (See instructions.) Note: $545 calculated from example, Page 3.        
16. Enter amount from Line 18 of the preceding column of this Schedule.        
17. Add Line 15 and Line 16 and enter the total.        
18. If Line 17 is more than Line 14, subtract Line 14 from Line 17. (If less than zero, enter 0.)        
19. Enter the smaller of Line 14 or Line 17.        
20. Total required payment for the period. Add Line 13 and Line 19.        
21. Withholding and estimated tax payments through the due date for the period. (See instructions)        
22. Estimated tax payment required by the next due date. Subtract Line 21 from Line 20 and enter the result (but not less than 0).        

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.)

Estates and trusts must enter their Connecticut taxable income. Estates and trusts must use the following period ending dates: 2/28/98, 4/30/98, 7/31/98 and 11/30/98.

Line 2. Estates and trusts: do not use the amounts shown in Columns (a) - (d). Instead use 6, 3, 1.71429 and 1.09091, as the annualized amounts.

Line 4: Resident individuals must compute the tax on the amount shown on Line 3, using the tax calculation schedule on Form CT-1040ES. When completing columns (a) and (b) use Column A of the Tax Calculation Schedule and for columns (c) and (d) use Column B of the Tax Calculation Schedule. Resident estates and trusts multiply Line 3 by 4.5% (.045).

Nonresidents and part-year residents must use the schedules and worksheets for Form CT-1040NR/PY to determine Connecticut source income. Nonresident trusts and estates and part-year resident trusts must use the schedules and worksheets for Form CT-1041 to determine Connecticut source income. To calculate the tax, complete the worksheet below: (A separate worksheet should be completed for each period.)

a. annualized adjusted gross income from Line 3 of Worksheet CT-1040AES
b. annualized Connecticut source income
c. enter the greater of Line a or b
d. enter the tax due on Line c using the tax calculation schedule on Form CT-1040ES. When completing columns (a) and (b) use Column A of the Tax Calculation Schedule and for columns (c) and (d) us Column B of the Tax Calculation Schedule. Trusts and estates multiply Line c by 4.5% (.045)
e. divide Connecticut source income for the period by Connecticut adjusted gross income for the period. This is your Allocated Connecticut Income Tax Percentage. (If Line b is greater than Line a, enter 1.0000.)
f. multiply Line d by Line e. Enter here and on Line 4 of Worksheet CT-1040 AES

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 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 9. Include the adjusted net Connecticut minimum tax credit you can claim because of events that occurred during the period.

Line 15. Enter 25% of your required annual payment as calculated on the worksheet to Form CT-1040ES, Individual Estimated Income Tax Coupon. (See Line 4)

Line 21. 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 21 for each period, multiply your total expected withholding for the taxable year by:

25% (.25) for the first period
50% (.50) for the second period
75% (.75) for the third period
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 21.

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


WORKSHEET CT-1040AES

Sample Connecticut Annualized Estimated Tax Worksheet
(This worksheet is the basis for the example shown on Page 3.)

Complete each column after the end of each payment period shown.

NOTE: Estates and trusts, do not use the period ending dates shown to the right. Instead, use the following: 2/28/98, 4/30/98, 7/31/98 and 11/30/98.

(a)
January 1
to
March 31

(b)
January 1
to
May 31

(c)
January 1
to
August 31

(d)
January 1
to
December 31

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

20,000

25,000 30,000 70,000
2. Annualized amounts (Estates and trusts, see instructions).

4

2.4 1.5 1
3. Annualized Connecticut adjusted gross income. Multiply Line 1 by Line 2.

80,000

60,000 45,000 70,000
4. Enter the tax due on the amount on Line 3. (See instructions)

3,506

2,606 1,721 3,038
5. Net Credit for income taxes paid to other jurisdictions - Residents and Part-year Residents only (See instructions).

-0-

-0- -0- -0-
6. Subtract Line 5 from Line 4.

3,506

2,606 1,721 3,038
7. Connecticut Alternative Minimum Tax (See instructions).

-0-

-0- -0- -0-
8. Add Line 6 and Line 7.

3,506

2,606 1,721 3,038
9. Adjusted Net Connecticut Minimum Tax Credit (See instructions).

-0-

-0- -0- -0-
10. Total annualized income tax. Subtract Line 9 from 8.

3,506

2,606 1,721 3,038
11. Applicable percentages.

0.225

0.45 0.675 0.90
12. Multiply Line 10 by Line 11.

789

1,173 1,162 2,734
13. Add the amounts in all preceding columns of Line 19.   545 1,090 1,162
14. Annualized Income Installment. Subtract Line 13 from Line 12. (If zero or less, enter 0.)

789

628 72 1,572
15. Enter 25% of your Required Annual Payment. (See instructions.) Note: $545 calculated from example, Page 3.

545

545 545 545
16. Enter amount from Line 18 of the preceding column of this Schedule.   -0- -0- 473
17. Add Line 15 and Line 16 and enter the total.

545

545 545 1,018
18. If Line 17 is more than Line 14, subtract Line 14 from Line 17. (If less than zero, enter 0.)

-0-

-0- 473 -0-

19. Enter the smaller of Line 14 or Line 17.

545 545 72 1,018
20. Total required payment for the period. Add Line 13 and Line 19. 545 1,090 1,162 2,180
21. Withholding and estimated tax payments through the due date for the period. (See instructions)

-0-

-0- -0- -0-
22. Estimated tax payment required by the next due date. Subtract Line 21 from Line 20 and enter the result (but not less than 0). 545 1,090 1,162 2,180

IP 93(6.4)
Income tax
Issued: 1/27/98
Supersedes: IP 93(6.3) Issued 12/17/96