What Form 1040-ES (2014) Is For
Form 1040-ES is used to calculate and pay estimated tax on income that is not subject to withholding. It is required when individuals receive earnings from self-employment, freelance work, investments, rental properties, or business income where no taxes are automatically withheld. It includes a worksheet to estimate the annual tax and quarterly vouchers for taxpayers who choose to pay by mail.
Individuals must generally file Form 1040-ES if they expect to owe at least $1,000 in tax after subtracting withholding and refundable credits. Estimated tax also applies when taxpayers know their withholding will be less than 90 percent of the 2014 total tax or 100 percent of the prior year’s tax. Taxpayers with no tax liability for the full 2013 tax year usually do not need to make estimated payments. These calculations ultimately affect a taxpayer’s federal individual income tax obligations and help prevent a large balance due at year-end.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive guide for Form 1040-ES: Estimated Tax for Individuals (2014).
When You’d Use Form 1040-ES
Taxpayers use Form 1040-ES when they receive income that is not subject to withholding and must make quarterly estimated tax payments. This situation is typical for self-employed individuals, business partners, landlords, and investors. Partners receiving pass-through income, who typically report on a Partnership Return of Income, often use this form because their share of partnership income is not withheld by default.
Taxpayers use this form when their income experiences a significant change during the year. If earnings rise, payments should increase to prevent penalties. If earnings decline, remaining payments can be adjusted accordingly. Form 1040-ES also allows amended estimated payments at any point in the year. Late payments are permitted but may still result in underpayment penalties, even when the annual return yields a refund. Penalties may be waived when taxpayers experience unusual circumstances, such as disasters or sudden financial hardship.
Key Rules or Details for 2014
Specific rules determine when estimated taxes for 2014 must be paid. Taxpayers must make estimated payments if they expect to owe at least $1,000 after subtracting withholding and credits. Farmers and fishermen may pay 66⅔ percent of their estimated tax instead of the standard 90 percent of their tax liability. Taxpayers with a 2013 adjusted gross income above $150,000 (or $75,000 for married filing separately) must pay 110 percent of their 2013 tax to meet safe harbor requirements.
The 2014 tax year includes specific deduction and exemption amounts. The standard deduction is $12,400 for married filing jointly, $9,100 for head of household, and $6,200 for single or married filing separately. The personal exemption is $3,950 per person, subject to phase-out rules for high-income taxpayers. The 2014 Social Security wage base is $117,000. This tax year also requires taxpayers to report their health coverage status on their annual return. Individuals without qualifying coverage may be required to pay a shared responsibility payment, which can be included in their annual tax return. Some taxpayers may also face reductions in itemized deductions when their income exceeds certain thresholds.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Schedules.
Step-by-Step (High Level)
Taxpayers start by gathering the prior year’s return, the 2014 tax rate schedules, and the Form 1040-ES worksheet. They estimate income, deductions, exemptions, and credits to calculate their estimated tax.
Steps include:
- Estimate adjusted gross income for 2014 based on projected income.
- Determine whether the standard deduction or itemized deductions will be used.
- Calculate exemptions by multiplying $3,950 by the number of allowable exemptions.
- Subtract deductions and exemptions from adjusted gross income to identify taxable income.
- Apply the 2014 tax rate schedules to determine the tentative tax.
- Add additional taxes, including self-employment or alternative minimum tax.
- Subtract credits and withholding to determine the amount that must be paid.
- Divide any remaining amount into four quarterly payments.
Taxpayers with self-employment or business income should ensure their business classification codes are accurate, especially when income comes from multiple business activities. Quarterly payments for 2014 are due April 15, June 16, September 15, 2014, and January 15, 2015. Payments may be made electronically using IRS systems or mailed with the appropriate payment voucher. Some taxpayers also make estimated state payments using forms such as Form 1040N when filing state-level estimated taxes.
Learn more about federal tax filing through our IRS Form Help Center or explore IRS assistance options.
Common Mistakes and How to Avoid Them
- Underestimating income for quarterly payments: Review your income before each due date and use the annualized income installment method if your earnings vary, to avoid underpayment penalties.
- Miscalculating self-employment tax: Apply the tax rate only to 92.35% of net self-employment income and deduct half of the tax when computing adjusted gross income to ensure accurate estimates.
- Using joint estimated tax vouchers when not permitted: Do not file joint payments if spouses have different tax years, are separated, or if either spouse is a nonresident alien, and confirm the correct IRS mailing address.
- Delaying or misapplying payments by using the wrong IRS address: Verify the proper payment address for your state to prevent processing delays or lost estimated tax credits.
- Failing to update name changes with the SSA: Notify the Social Security Administration of any name change and attach a statement listing payments made under both names to avoid mismatched tax records.
What Happens After You File
Estimated tax payments made with Form 1040-ES are applied to the taxpayer’s IRS account. Electronic payments typically post within one to two business days, while mailed vouchers take longer. Taxpayers can review their payment history by accessing their IRS online account.
When the 2014 annual return is filed, estimated payments and withholding are applied to the final tax liability. A refund is issued if costs exceed the amount owed. If underpaid, the remaining balance must be paid with the return. Failure to meet safe harbor rules may result in an underpayment penalty. Taxpayers may use Form 2210 to calculate the penalty or request a waiver in qualifying circumstances.
FAQs
Can estimated tax be paid in one lump sum?
Yes, the full estimated tax for 2014 may be paid by April 15 rather than through four installments.
Can increasing withholding replace making estimated payments?
Yes, withholding may be increased by submitting a new Form W-4 to an employer. The IRS treats withholding as evenly paid throughout the year.
How does the higher-income requirement work?
Taxpayers with a 2013 adjusted gross income above $150,000, or $75,000 for married filing separately, must pay 110 percent of their 2013 tax to meet safe harbor rules.
What should taxpayers do if their income changes?
Taxpayers should recalculate estimated payments and adjust them as needed. The annualized income installment method is beneficial for individuals with inconsistent income.
Can the January 2015 payment be skipped?
Yes, if the taxpayer files a complete 2014 return by February 2 and pays the full balance with that return.
What happens if no estimated payments are made?
The IRS may charge an underpayment penalty unless the taxpayer qualifies for an exception, such as owing less than $1,000 or having no tax liability for the year in question.
How can lost vouchers be replaced?
Additional vouchers may be photocopied from unused originals or downloaded from IRS resources. Electronic payments are an alternative that avoids the need for vouchers.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
