Connecticut Administrative Code › Title 12 - Taxation › 740(a) - INCOME TAX › Part VIII - Estimated tax › Section 12-722(d)(2)-1 - Annualized income installments

Current through July 10, 2024
(a) A taxpayer may
				use the annualized income installment method if the taxpayer's income
				fluctuates throughout the year due to, for example, the operation of a seasonal
				business. A taxpayer also may use the annualized income installment method if
				it becomes apparent during the year that the taxpayer overestimated Connecticut
				taxable income at the time the taxpayer paid any prior installment of estimated
				income tax. Using the annualized income installment method may enable the
				taxpayer to reduce the amount of, or eliminate, one or more required
				installments. To use the annualized income installment method, the taxpayer
				should establish, by completing a Form CT-2210 (and the annualized income
				installment schedule thereto) and attaching such form to the Connecticut income
				tax return for the taxable year, that, in the case of any required installment,
				the annualized income installment is less than the required installment, as
				determined under subdivision (1) of subsection (d) of Section
				12-722
				of the general statutes. A taxpayer who uses the annualized income installment
				method for any installment due date shall use it for all installment due
				dates.
(b) In the case of any
				required installment, the annualized income installment is the excess, if any,
				of an amount equal to the applicable percentage of the tax for the taxable year
				on the annualized Connecticut taxable income for months in the taxable year
				ending before the due date for the installment, over the aggregate amount of
				any prior required installments for months in the taxable year ending before
				the due date for the installment. Such prior required installments shall
				include, in accordance with subsection (k) of section
				12-722
				of the General Statutes, any tax withheld under chapter 229 of the General
				Statutes. Where the annualized income installment is less than any required
				installment, any reduction in such required installment resulting from the
				application of subdivision (2) of subsection (d) of section
				12-722
				of the General Statutes shall be recaptured by increasing the amount of the
				next required installment by the amount of such reduction and by increasing
				subsequent required installments to the extent that the reduction has not
				previously been recaptured under such subdivision.
(c)
Example
: A is an unmarried
				resident individual whose 1992 Connecticut taxable income was $50,000. The tax
				shown on A's 1992 Form CT-1040 was $2249. A's 1992 taxable year was a taxable
				year of twelve months.
First Required Installment
. By the end of the
				  third month of A's 1993 taxable year, A has Connecticut taxable income in the
				  amount of $15,000. On the basis of A'S Connecticut taxable income during the
				  first three months of his 1993 taxable year ($15,000), A's annualized income is
				  $60,000 ($15,000 multiplied by the annualization factor of 4). Therefore, when
				  the first required installment for A's 1993 taxable year is due, the tax that
				  will be shown on A's 1993 Form CT-1040, based on A's projected 1993 Connecticut
				  taxable income of $60,000, is $2699. Accordingly, A's required annual payment
				  is the lesser of: $2249, which is 100% of the tax shown on A's 1992 Form
				  CT-1040, or$2429, which is 90% of the tax that will be shown on A's 1993 Form
				  CT-1040 ($2699), based on A's projected 1993 Connecticut taxable income of
				  $60,000.
Therefore, A's required annual payment is $2249. The amount
				  that A shall pay for the first required installment is $562 (25% of
				  $2249).
Second Required Installment
.By the end of the
				  fifth month of A's 1993 taxable year, A has Connecticut taxable income in the
				  amount of $20,000 and decides to use the annualized income installment method.
				  On the basis of A's Connecticut taxable income during the first five months of
				  his 1993 taxable year ($20,000), A's annualized income is $48,000 ($20,000
				  multiplied by the annualization factor of 2.4). The tax on such annualized
				  income is $1943. The amount that A shall pay for the second required
				  installment is the lesser of: $562, which is 25% of A's required annual payment
				  of $2249, or$312, which is the tax on the annualized income ($1943) multiplied
				  by the applicable percentage (0.45), from which product ($874) is subtracted
				  the amount of the prior required installment for the taxable year
				  ($562).
The amount that A shall pay for the second required
				  installment is $312. The amount that shall be recaptured in subsequent required
				  installments is $250, which is the amount by which the required installment
				  ($562) is reduced by using the annualized income installment method
				  $312).
Third Required Installment
.By the end of the
				  eighth month of A's 1993 taxable year, A has Connecticut taxable income in the
				  amount of $25,000. Because A paid the tax on his annualized income for the
				  second installment, he shall compute the annualized income installment for his
				  third installment. On the basis of A's Connecticut taxable income during the
				  first eight months of his taxable year ($25,000), A's annualized income is
				  $37,500 ($25,000 multiplied by the annualization factor of 1.5). The tax on
				  such annualized income is $1518. The amount that A shall pay for the third
				  required installment is the lesser of: $812, which is the sum of $562 (25% of
				  A's required annual payment of $2249) plus $250 (the recaptured reduction in
				  the preceding required installment resulting from annualization), or $150,
				  which is the tax on the annualized income amount ($1518) multiplied by the
				  applicable percentage (0.675), from which product ($1024) is subtracted the
				  aggregate amount of any prior required installments for the taxable year
				  ($874).
The amount that A shall pay for the third required
				  installment is $150. The amount that shall be recaptured in subsequent required
				  installment is $662, which is the amount by which the required installment
				  ($812) is reduced by using the annualized income installment method
				  ($150).
Fourth Required Installment
.At the end of A's
				  1993 taxable year, A has Connecticut taxable income in the amount of $75,000.
				  Because A paid the tax on his annualized income for the third installment, he
				  shall compute the annualized income installment for his fourth installment. A's
				  total Connecticut taxable income for the year ($75,000) is the same as his
				  annualized income ($75,000 multiplied by the annualization factor of 1). The
				  tax on $75,000 is $3374. The amount that A shall pay for the fourth required
				  installment is the lesser of: $1224, which is the sum of $562 (25% of A's
				  required annual payment of $2249) plus $662 (the recaptured reduction in the
				  preceding required installment resulting from annualization), or $2013, which
				  is the tax on the annualized income amount ($3374) multiplied by the applicable
				  percentage (0.9), from which product ($3037) is subtracted the aggregate amount
				  of any prior required installments for the taxable year ($1024).
The amount that A shall pay for the fourth installment is
				  $1224.
If A makes four timely installments in the amounts required,
				  a is not subject to an addition to tax for his 1993 taxable year, and shall pay
				  the balance of tax due ($1126) on or before the fifteenth day of the fourth
				  month following the close of A's 1993 taxable year.
(d) While this section pertains to Section
				12-722(d)
				of the general statutes, for purposes of supplementary interpretation, as the
				phrase is used in Section
				12-2
				of the general statutes, the adoption of this section is authorized by Section
				12-740(a)
				of the general statutes.