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Penalty Questions

Question: What is meant by "no tax liability" in the exceptions to the estimated tax penalty?

Answer:

You do not have to pay estimated tax if you meet all three of the following conditions:

  • You had no tax liability for the prior year.
  • You were a U.S. citizen or resident for the whole year.
  • Your prior tax year covered a 12-month period.

You had no tax liability if your total tax was zero or you did not have to file an income tax return.

  • Your total tax on Form 1040 (PDF) is the amount listed on the line labeled "total tax" taking in consideration certain reductions.  See the section "No Tax Liability Last Year" in chapter 4 of Publication 505, Tax Withholding and Estimated Tax, for these reductions.
  • On Form 1040A (PDF), it is labeled "total tax" reduced by the amount of earned income credit, additional child tax credit and refundable American opportunity credit.
  • On Form 1040EZ (PDF), it is the amount labeled "tax" reduced by the amount of earned income credit.

Additional Information:


Category: Estimated Tax
Subcategory: Penalty Questions

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224