Adjust Estimated Tax Payments to Get Tax Cut Benefits


Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

Advance Child Tax Credit Payments

  • Form 1040-ES, Estimated Tax for Individuals (2005 form obsoleted)
  • Pub. 505, Tax Withholding and Estimated Tax (367K PDF)
  • ' data-editor-value-is-changed="false" data-editor-active-text-format="rich_text">

    Some of the tax cuts in the Jobs and Growth Tax Relief Reconciliation Act of 2003 will reach taxpayers without any action on their part. For example, the IRS automatically figured the advance payments of the Child Tax Credit increase that were sent starting July 25 to most taxpayers who claimed this credit on their 2002 returns. And employers are using new tax withholding tables, reflecting lower tax rates and a higher standard deduction for married couples.

    But for self-employed persons and those who have significant income from capital gains or dividends, the way to get the tax benefits in advance of filing their 2003 returns may be to adjust the remaining estimated tax payment, due Jan. 15, 2004. Many have already made such adjustments to their June and/or September 2003 payments.

    When using the worksheets with Form 1040-ES or Publication 505, take these changes for individuals into account:

    • A higher standard deduction for married persons: $9,500 for couples; $4,750 for those filing separate returns.
    • Tax rate reductions: the 10% rate applies to the first $7,000 of taxable income for single persons, $14,000 for married persons filing jointly; the 15% rate for married couples covers up to $56,800 of taxable income; and all rates above 15% are lower. Use the new tax rate schedules to figure your 2003 tax.
    • Lower tax rates for long-term capital gains on assets sold after May 5, 2003, and for qualified 2003 dividend income: 5% for those that would have been taxed at a regular rate of 10% or 15%; 15% for most items that would have been taxed at a higher rate. (But there are no changes in the special rates that apply to unrecaptured section 1250 gain, collectibles gain, or section 1202 gain.)
    • A higher alternative minimum tax exemption amount: $40,250 for a single person or a head of household; $58,000 for married persons filing jointly and qualifying widow(er)s; and $29,000 for married persons filing separately.

    Business owners should also consider changes to the first-year depreciation allowance and the Section 179 expensing deduction.

    You don’t have to wait until your 2003 return to benefit from the tax cuts. Act now to bring the tax you pay closer to the tax you owe.

    Easy Ways to Pay

    • Electronic Federal Tax Payment System — Make your estimated tax payments online or by phone through the Electronic Federal Tax Payment System. EFTPS is free, available 24/7 and you can set up your quarterly payments for the entire year in one visit. You can change or cancel your payment at any time. EFTPS sends you an electronic acknowledgement of your completed transactions and you can see 16 months of your EFTPS payment history. Visit the EFTPS Web site to enroll online or get more information. For a paper enrollment form call 1-800-555-4477 or 1-800-945-8400.
    • Credit Card — Pay your estimated taxes by credit card. The credit card payment option is available through authorized private sector companies that offer both phone and Internet services. The companies charge a fee for the service. For information on credit card payment options including features, benefits and fees, visit /efile and click on Electronic Payment Options.

    Related Items: