Federal Tax

Estimated Tax (Portfolio 581)

  • This Portfolio discusses estate planning considerations relating to distributions from qualified retirement plans and individual retirement accounts (IRAs).


Bloomberg Tax Portfolio, Estimated Tax, No. 581, describes in detail the requirements of individuals, corporations, estates, trusts, tax-exempt organizations, and private foundations for paying estimated tax.

Taxpayers are generally required to pay their income tax liability in installments in the form of estimated tax payments as they earn income. If a taxpayer fails to make the minimum required payment of any installment of estimated tax, an addition to tax is imposed. However, no addition to tax is imposed if the taxpayer meets one of the statutory exceptions.

Different rules apply to individuals and corporations (including S corporations with respect to certain corporate-level taxes). Trusts and estates (including the grantor trust of a decedent which receives the residue of the probate estate) with respect to tax years more than two years after the decedent’s death must compute their estimated tax in the same manner as an individual, while tax-exempt organizations and private foundations (whether organized as a corporation or a trust) are generally treated as corporations for this purpose.

In addition, certain partnerships and S corporations that elect a tax year other than the required tax year must make certain “required payments.” These payments are intended to deposit with the IRS an amount equal to the benefit of the tax deferral obtained by the partners and shareholders from owning an interest in a fiscal year pass-through entity. These required payments are in addition to any estimated tax payments required to be made by the partners or shareholders.

Partnerships with foreign partners must also withhold and remit to the IRS in a manner similar to estimated tax payments a portion of the foreign partner’s distributive share of partnership income that is effectively connected with a U.S. trade or business. This Portfolio discusses the applicable Code sections and analyzes (1) the requirements to pay estimated tax; (2) the amount and timing of each required installment payment; (3) the penalties for not making timely payments of estimated tax; (4) the exceptions to these requirements; (5) the required payments for certain partnerships and S corporations that use a fiscal year; and (6) the amounts required to be withheld and paid over by partnerships with foreign partners.

Table of Contents

I. Introduction
II. Individuals
III. Trusts and Estates
IV. Corporations
V. Tax-Exempt Organizations and Private Foundations
VI. Required Payments by Fiscal Year Entities
VII. Constitutionality of Estimated Tax

Alan Tarr
Loeb & Loeb LLP
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