TaxNewsFlash-United States

February 26, 2010
No. 2010-91

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Regulations on Reduced Estimated Tax Requirements for Qualified Individuals with Income From a Small Business

The Treasury Department and IRS today released for publication in the Federal Register temporary regulations (T.D. 9480) and, by cross-reference, proposed regulations (REG-117501-09) providing rules for reduced estimated income tax payments of qualified individual taxpayers with income from a small business for tax years beginning in 2009.

For an electronic version of the regulations: T.D. 9480 and REG-117501-09

Overview

Provisions under the American Recovery and Reinvestment Act of 2009 reduced the estimated tax payments that certain individuals were required to make for tax years beginning in 2009. Today’s regulations provide rules implementing these changes.

With the 2009 Act changes, concerning estimated tax payments of eligible individual taxpayers, the applicable percentage of tax shown on the taxpayer’s return for the preceding tax year (either 100% or 110%) is reduced to 90% for tax years beginning in 2009.

The temporary regulations define the terms:

  • “Qualified individual”—In general, any individual whose adjusted gross income for the preceding tax year is less than $500,000 ($250,000 if married filing separately) and who certifies that more than 50% of such gross income was from a small business
  • Income from a “small business”—In general, income from a trade or business the average number of employees of which was less than 500 for calendar year 2008

The regulations are effective on March 1, 2010—the date when they are scheduled to be published in the Federal Register.

 

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