IRS revises estimated tax form for TCJA

The Internal Revenue Service has revised the Form 1040-ES and instructions to help taxpayers and their tax practitioners prepare for the changes ahead in the wake of the recently enacted Tax Cuts and Jobs Act.

The IRS reminded taxpayers Friday that the first quarterly estimated tax payment is due on Tuesday, April 17, the same date as the annual tax filing deadline.

The service also noted that the new tax law changed the way tax is calculated for most taxpayers, including people who have substantial income that isn’t subject to withholding taxes. For example, the new law changed the tax rates and brackets, overhauled business expense deductions, upped the standard deduction, eliminated personal exemptions, increased the child tax credit and limited or stopped certain deductions. That means many taxpayers will need to raise or lower the amount of tax they pay each quarter through the estimated tax system.

The new estimated tax package, Form 1040-ES, which is now available on IRS.gov, aims to help taxpayers figure these payments correctly. The revised package includes a brief summary of some of the main tax changes, income tax rate schedules for 2018 along with a worksheet for determining the correct amount to pay. The IRS also mailed 1 million Form 1040-ES vouchers with instructions in late March to taxpayers who used the Form 1040-ES last year.

Along with the revised tax form, a companion publication, Publication 505, Tax Withholding and Estimated Tax, contains extra details, including worksheets and examples, that can help taxpayers and their tax preparers determine whether they should pay estimated tax, including taxpayers who have dividend or capital gain income, owe the Alternative Minimum Tax or have other special situations.

The IRS pointed out that self-employed people, including some of those involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others whose income isn’t subject to withholding typically need to make quarterly tax payments as well. Along with self-employment income, other income that’s usually not subject to withholding includes interest, dividends, capital gains, alimony and rental income.