Publication 505 (Rev. January 2012) Contents
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Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 8 Draft Ok to Print AH XSL/XML Fileid: Publications/P505/2012/A/XML/Cycle02/source (Init. & Date) _______ Page 1 of 78 11:11 - 31-Jul-2012 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Publication 505 (Rev. January 2012) Contents Cat. No. 15008E Introduction .................. 1 Department of the What's New for 2012 ............. 2 Treasury Internal Tax Expiring Tax Benefits ............ 2 Revenue Service Withholding Reminders ................... 2 Chapter 1. Tax Withholding for 2012 .................... 3 and Estimated Salaries and Wages ........... 3 Tips ................... 14 Tax Taxable Fringe Benefits ........ 15 Sick Pay ................. 15 Pensions and Annuities ........ 15 Gambling Winnings .......... 16 Unemployment Compensation .... 17 Federal Payments ........... 17 Backup Withholding .......... 17 Chapter 2. Estimated Tax for 2012 ................... 26 Who Does Not Have To Pay Estimated Tax ........... 26 Who Must Pay Estimated Tax ..... 26 How To Figure Estimated Tax .... 28 When To Pay Estimated Tax ..... 31 How To Figure Each Payment .... 31 How To Pay Estimated Tax ...... 35 Illustrated Examples .......... 36 Chapter 3. Credit for Withholding and Estimated Tax for 2011 .... 53 Withholding ............... 53 Estimated Tax ............. 54 Excess Social Security or Railroad Retirement Tax Withholding ............. 55 Chapter 4. Underpayment Penalty for 2011 ................. 57 General Rule .............. 57 Exceptions ............... 58 Figuring Your Required Annual Payment (Part I) .......... 59 Short Method for Figuring the Penalty (Part III) .......... 59 Regular Method for Figuring the Penalty (Part IV) .......... 59 Annualized Income Installment Method (Schedule AI) ....... 62 Farmers and Fishermen ........ 63 Waiver of Penalty ............ 63 Chapter 5. How To Get Tax Help .... 74 Index ..................... 76 Introduction The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive in- come during the year. There are two ways to pay as you go. Withholding. If you are an employee, your Get forms and other Information employer probably withholds income tax from your pay. In addition, tax may be with- faster and easier by: held from certain other income, such as Internet IRS.gov pensions, bonuses, commissions, and Jul 31, 2012 Page 2 of 78 Fileid: Publications/P505/2012/A/XML/Cycle02/source 11:11 - 31-Jul-2012 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. gambling winnings. The amount withheld is Tax questions. If you have a tax question, Two children lived with you and you paid to the Internal Revenue Service (IRS) check the information available on IRS.gov or earned less than $41,592 ($47,162 if mar- in your name. call 1-800-829-1040. We cannot answer tax ried filing jointly), Estimated tax. If you do not pay your tax questions sent to either of the above ad- One child lived with you and you earned through withholding, or do not pay enough dresses. less than $36,920 ($42,130 if married filing tax that way, you might have to pay esti- jointly), or mated tax. People who are in business for A child did not live with you and you themselves generally will have to pay their earned less than $13,980 ($19,190 if mar- tax this way. You may have to pay estima- What's New for 2012 ried filing jointly). ted tax if you receive income such as divi- Future developments. The IRS has created a Also, the maximum AGI you can have and dends, interest, capital gains, rents, and page on IRS.gov for information about Publica- still get the credit has increased. You may be royalties. Estimated tax is used to pay not tion 505 at www.irs.gov/pub505. Information able to take the credit if your AGI is less than only income tax, but self-employment tax about any future developments affecting Publi- the amount in the above list that applies to you. and alternative minimum tax as well. cation 505 (such as legislation enacted after we The maximum investment income you can have This publication explains both of these meth- release it) will be posted on that page. and get the credit has increased to $3,200. ods. It also explains how to take credit on your Income limits for excluding education sav return for the tax that was withheld and for your ings bond interest increased. In order to ex- estimated tax payments. clude interest, your modified adjusted gross in- Expiring Tax Benefits If you did not pay enough tax during the come (MAGI) must be less than $87,850 year, either through withholding or by making ($139,250 if married filing jointly or qualifying The following benefits are scheduled to expire estimated tax payments, you may have to pay a widow(er)). or have been repealed and will not be available penalty. Generally, the IRS can figure this pen- for 2012. alty for you. This underpayment penalty, and Foreign earned income exclusion. The max- imum exclusion has increased to $95,100. Personal tax credits allowed against the exceptions to it, are discussed in chapter 4. regular tax and alternative minimum tax Standard mileage rates. The rate for busi- Nonresident aliens. Before completing Work opportunity tax credit ness use of your vehicle is increased to 55.5 Form W-4, nonresident alien employees should Deduction for state and local general sales cents per mile. The rate for use of your vehicle see the Instructions for Form 8233, Exemption tax to get medical care or move is increased to 23 From Withholding on Compensation for Inde- Deduction for qualified tuition and related cents per mile. The rate of 14 cents per mile for pendent (and Certain Dependent) Personal expenses expires charitable use is unchanged. Services of a Nonresident Alien Individual. Also Deduction for educator expenses see chapter 8 of Publication 519, U.S. Tax Personal exemption increased. For tax Nonbusiness energy credits Guide for Aliens, for important information on years beginning in 2012, the personal exemp- Credit for tax credit bonds withholding. tion amount is increased to $3,800. Alternative minimum tax (AMT) exemption Qualified electric vehicle passive activity What's new for 2011 and 2012. See What's amount decreased. The AMT exemption credit New for 2012 in this chapter 1, and What's New amount is decreased to $33,750 ($45,000 if in chapter 4 for 2011 changes. married filing jointly or qualifying widow(er); $22,500 if married filing separately). Comments and suggestions. We welcome Reminders your comments about this publication and your Lifetime learning credit income limits de creased. In order to claim a lifetime learning Roth IRAs. If you rolled over or converted part suggestions for future editions. or all of another retirement plan to a Roth IRA in You can write to us at the following address: credit, your MAGI must be less than $52,000 ($104,000 if married filing jointly). 2010, or made an in-plan rollover to a designa- ted Roth account in 2010, and did not elect to Internal Revenue Service Retirement savings contribution credit in include all of the resulting taxable amount in in- Individual Forms and Publications Branch come limits increased. In order to claim this come for 2010, you must report half of that taxa- SE:W:CAR:MP:T:I credit, your MAGI must be less than $28,750 ble amount on your 2011 return and the rest on 1111 Constitution Ave. NW, IR-6526 ($57,500 if married filing jointly; $43,125 if head your 2012 return. See the Instructions for Form Washington, DC 20224 of household). 8606 for more information. Adoption credit or exclusion. The maximum Social security (FICA) tax. Generally, each We respond to many letters by telephone. adoption credit or exclusion for employer-provi- employer for whom you work during the tax Therefore, it would be helpful if you would in- ded adoption benefits has decreased to year must withhold social security tax up to the clude your daytime phone number, including $12,650. In order to claim either the credit or ex- annual limit. The annual limit is $110,100 in the area code, in your correspondence. clusion, your MAGI must be less than $229,710. 2012. You can email us at [email protected]. Please put “Publications Comment” on the sub- Adoption credit no longer refundable. For Photographs of missing children. The Inter- ject line. You can also send us comments from years beginning after 2011, the adoption credit nal Revenue Service is a proud partner with the www.irs.gov/formspubs/. Select “Comment on is no longer refundable. National Center for Missing and Exploited Chil- Tax Forms and Publications” under “Information Temporary decrease in employee's share dren. Photographs of missing children selected about.” of payroll tax extended. Social security will by the Center may appear in this publication on Although we cannot respond individually to be withheld from an employee’s wages at the pages that otherwise would be blank. You can each comment received, we do appreciate your rate of 4.2% (down from 6.2%) up to the social help bring these children home by looking at the feedback and will consider your comments as security wage limit of $110,100. There is no photographs and calling 1-800-THE-LOST we revise our tax products. change to Medicare withholding. (1-800-843-5678) if you recognize a child. The same decrease applies to net earnings Ordering forms and publications. Visit from self-employment—the rate will be 10.4% www.irs.gov/formspubs/ to download forms and (down from 12.4%) up to the social security publications, call 1-800-829-3676, or write to wage limit of $110,100.