This Information Publication has been obsoleted and superseded by IP 99(33)
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:
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:
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).
Request the most recent edition of the following publications and forms:
FOR FURTHER INFORMATION: If you have questions about Connecticut taxes, please call the Department of Revenue Services during business hours, Monday through Friday:
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:
Sample Connecticut Annualized Estimated Tax Worksheet
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.)
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:
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.)
Sample Connecticut Annualized Estimated Tax Worksheet