DRS: IP 2003(35), A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040 AES

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Informational Publication has been modified and superseded by IP 2004(17)

IP 2003(35)

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


Purpose: The purpose of this publication is to explain the annualized estimated income tax installment method, an alternate method for calculating installments of estimated Connecticut income tax. If your income is not received evenly throughout the year because you earned more income later in the year than you did in the early part of the year, you may benefit by using this alternate 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?

You must make estimated Connecticut income tax payments if your Connecticut income tax (after tax credits) minus Connecticut income tax withheld is more than $500, and you expect your Connecticut income tax withheld to be less than your required annual payment.


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.

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 for the preceding taxable year with Connecticut source income.

If you were a nonresident or part-year resident and you did not have Connecticut source income in the preceding taxable year, you must use 90% of the income tax shown on your income tax return for the current taxable year as your required annual payment.


When Should I Pay My Estimated Income Tax?

Your estimated income tax payments for the current taxable year are due April 15, June 15, September 15, and January 15. (Taxpayers who are not calendar year filers must follow the filing dates required for federal income tax purposes.) If the due date falls on a Saturday, Sunday, or legal holiday, the next business day is the due date.


How Much Should I Pay With Each Installment?

You must pay 25% (.25) of your required annual payment with each installment. However, if you do not receive your income evenly throughout the year because you earned more income later in the year than you did in the early part of the year, you may benefit from using the annualized income installment method. If you use this alternate method, you may vary the amount of one or more of your installments depending upon the amount of income you earned during the period preceding the due date of each installment. Using this method, you may be able to reduce or eliminate one or more payments for periods when your income is low and make larger payments during the remaining periods when your 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, Estimated Connecticut Income Tax Payment Coupon for Individuals, 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-1040 AES, 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?

Submit each payment of estimated tax with a coupon (Form CT-1040ES). If you made estimated Connecticut income tax payments for the preceding taxable year, you will receive coupons in mid-January preprinted with your name, address, and Social Security Number for the next taxable year. Use the preprinted coupons to ensure your payments are properly credited. If you did not make estimated payments for the preceding taxable year, use the Form CT-1040ES included in your Connecticut income tax booklet or request it from the Department of Revenue Services (see Forms and Publications below). If you file this form, additional coupons will be mailed to you.


What Happens If I Underestimated My Tax?

If you are required to make estimated income tax payments and you do not pay enough tax during the current taxable year through withholding or estimated tax payments, or both, by any installment due date, you may be charged interest. This is true even if you are due a refund when you file your tax return. Interest is calculated separately for each installment from the due date of the installment until the earlier of April 15 of the following taxable year, or the date on which the underpayment is paid. Therefore, you may owe interest for an earlier installment even if you paid enough to make up the underpayment with a later installment. Interest at 1% (.01) per month, or fraction of a month, will apply to each underpayment.

If you file your Connecticut income tax return for the current taxable year on or before January 31, of the following taxable year, and pay the full amount computed on the return as payable for the taxable year, you will not owe interest for failure to make your fourth required installment. This does not apply to taxpayers paying estimated Connecticut income taxes as farmers or fishermen. See Informational Publication 2003 (20), Farmer's Guide to Sales and Use Taxes, Motor Vehicle Fuels Tax, Estimated Income Tax, and Withholding Tax.


Will Interest Apply If I Use the Annualized Estimated Income Tax Installment Method?

No. You will not owe interest if you correctly calculate your required installments by completing Worksheet CT-1040 AES, and you make the installment payments using Form CT-1040ES on or before the due date.

If your estimated installment payments are based on the annualized income installment method, you must check Box A, Part I, Form CT-2210, Underpayment of Estimated Income Tax by Individuals, Trusts, and Estates, and attach it to your income tax return. You must also check the Form CT-2210 box located on your Connecticut income tax return below the Name and Address section. This notifies DRS that your estimated income tax installments were not calculated using the regular installment method.


May I Apply Overpayments in the Prior Year to the Next Year's Estimated Tax?

Yes. If you file your Connecticut income tax return for the taxable year 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), you may elect to apply any overpayment of Connecticut income tax 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 estimated income tax paid on April 15. Your election to apply an overpayment to your next year's estimated tax is irrevocable.


Effect on Other Documents: Informational Publication 2003(33) is effective for taxable years beginning on or after January 1, 2004, and modifies and supersedes Informational Publication 99(33).


Effect of This Document: An Informational Publication addresses frequently asked questions about a current position, policy, or practice, usually in a less technical question and answer format.


Related Forms and Publications:

Form CT-1040ES, Estimated Connecticut Income Tax Payment Coupon for Individuals

Informational Publication 2003(20), Farmer's Guide to Sales and Use Taxes, Motor Vehicle Fuels Tax, Estimated Income Tax, and Withholding Tax.

Informational Publication 2003(36), Estimated Connecticut Income Tax


For Further Information:

Call DRS during business hours, Monday through Friday:

  • 1-800-382-9463 (in-state); or
  • 860-297-5962 (from anywhere)

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.


Forms and Publications: Forms and publications are available anytime by:

  • Internet: Preview and download forms and publications from the DRS Web Site at www.ct.gov/DRS;

  • Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (in-state) and select Option 2 from a touch-tone phone.

Paperless Filing Method (fast, easy, free, and confidential):

For resident income tax returns: Use WebFile to file personal income tax returns over the Internet. Visit the DRS Web site at www.ct.gov/DRS and click on File Returns On-Line.


IP 2003(35)
Income tax
Annualized Estimated Income Tax
Issued: 12/30/2003


Example for Annualized Estimated Tax:

Penny Wise is an unmarried, resident individual. She filed a Connecticut income tax return for the preceding taxable year, reporting a Connecticut income tax liability of $2,800.

Ms. Wise does not expect to receive her income evenly throughout the current taxable year. After completing her Form CT-1040ES, Estimated Connecticut Income Tax Payment Coupon for Individuals, Ms. Wise decides to use the annualized estimated income tax installment method. Her required annual payment from the Form CT-1040ES worksheet is $2,800.

Ms. Wise's only income for current taxable year is from a Connecticut business of which she is the sole proprietor. Her net profit from her business is received as follows:

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

5,000

September through December 40,000
TOTAL

$70,000

See the completed Worksheet CT-1040 AES for this example showing Penny Wise’s required installment payments for each period.


Worksheet CT-1040 AES, Sample Connecticut Annualized Estimated Tax Worksheet

Worksheet CT-1040 AES Instructions

Worksheet CT-1040 AES, Connecticut Annualized Estimated Tax Worksheet (Keep for your records)