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Penalty Questions

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

Answer:

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

Your total tax was zero if the amount identified in one of the following three situations was zero:

  • Your total tax on Form 1040, U.S. Individual Income Tax Return, was 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, U.S. Individual Income Tax Return, it was the amount listed on the line labeled "total tax" reduced by the shared responsibility payment, and any earned income credit, additional child tax credit, refundable American opportunity credit, and net premium tax credit.
  • On Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, it was the amount labeled "total tax" reduced by the earned income credit and shared responsibility payment, if applicable.

You did not have to file an income tax return if the section titled Who Must File in Publication 501, Exemptions, Standard Deduction, and Filing Information, for the prior tax year shows that you had no filing requirement.

For this exception to apply, two additional requirements must be met:

  • Your prior tax year was a taxable year of 12 months.
  • You were a citizen or resident of the United States throughout your prior tax year.

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
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