Specific Instructions

All line references on Form 1120-W are references to Form 1120, U.S. Corporation Income Tax Return. All other entities must determine their estimated tax liability by using the maximum rate that is in effect for their applicable taxable year.

Line 1. Qualified Personal Service Corporations

A qualified personal service corporation is taxed at a flat rate of 35% on taxable income. A corporation is a qualified personal service corporation if it meets both of the following tests.

  • Substantially all of the corporation's activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.

  • At least 95% of the corporation's stock, by value, is owned, directly or indirectly, by employees performing the services listed above, retired employees who had performed such services, any estate of an employee or retiree described above, or any person who acquired the stock of the corporation as a result of the death of an employee or retiree (but only for the 2-year period beginning on the date of the employee's or retiree's death). See Temporary Regulations section 1.448-1T(e) for details.

Lines 2, 5, and 8. Members of a Controlled Group

Members of a controlled group, complete lines 2, 5, and 8 as follows:

  • Enter on line 2 the smaller of the amount on line 1, or the member's share of the $50,000 amount.

  • Enter on line 5 the smaller of the amount on line 4, or the member's share of the $25,000 amount.

  • Enter on line 8 the smaller of the amount on line 7, or the member's share of the $9,925,000 amount.

Equal apportionment plan.   If no apportionment plan is adopted, members of a controlled group must divide the amount in each taxable income bracket equally among themselves. For example, Controlled Group AB consists of Corporation A and Corporation B. They do not elect an apportionment plan. Therefore, each corporation is entitled to:
  • $25,000 (one-half of $50,000) on line 2,

  • $12,500 (one-half of $25,000) on line 5, and

  • $4,962,500 (one-half of $9,925,000) on line 8.

Unequal apportionment plan.   Members of a controlled group can elect an unequal apportionment plan and divide the taxable income brackets as they want. There is no need for consistency among taxable income brackets. Any member may be entitled to all, some, or none of the taxable income bracket. However, the total amount for all members cannot be more than the total amount in each taxable income bracket.

Line 12. Additional 5% Tax

Members of a controlled group are treated as one group to figure the applicability of the additional 5% tax and the additional 3% tax. If an additional tax applies, each member will pay that tax based on the part of the amount used in each taxable income bracket to reduce that member's tax. See section 1561(a). Each member of the group must enter on line 12 its share of the smaller of (a) 5% of the taxable income in excess of $100,000 or (b) $11,750.

Line 13. Additional 3% Tax

If the additional 3% tax applies, each member of the controlled group must enter on line 13 its share of the smaller of (a) 3% of the taxable income in excess of $15 million or (b) $100,000. See the instructions for line 12 above.

Line 15. Alternative Minimum Tax (AMT)

Note.

Skip this line if the corporation is treated as a “small corporation” exempt from the AMT under section 55(e).

AMT is generally the excess of tentative minimum tax (TMT) for the tax year over the regular tax for the tax year. A limited amount of the foreign tax credit, as refigured for the AMT, is allowed in computing the TMT. Use the 2013 Form 4626 and the 2013 Instructions for Form 4626 as a guide.

Line 17. Tax Credits

For information on tax credits the corporation can take, see the 2013 Instructions for Form 1120, Schedule J, lines 5a through 5e, or the instructions for the applicable lines and schedule of other income tax returns.

Line 19. Other Taxes

For information on other taxes the corporation may owe, see the 2013 Instructions for Form 1120, Schedule J, line 9, or the instructions for the applicable line and schedule of other income tax returns.

Line 21. Credit for Federal Tax Paid on Fuels and Other Refundable Credits

See Form 4136, Credit for Federal Tax Paid on Fuels, to find out if the corporation qualifies to take this credit. Also include on line 21 any other refundable credit, including any credit the corporation is claiming under section 4682(g)(2) for tax on ozone-depleting chemicals. For information on other refundable credits, see the Instructions for Form 1120, Schedule J, line 19, or the instructions for the applicable line or schedule of other income tax returns.

Line 23a. 2013 Tax

Figure the corporation's 2013 tax in the same way that line 22 of this worksheet was figured, using the taxes and credits from the 2013 income tax return. Large corporations, see the instructions for line 25 below.

If a return was not filed for the 2013 tax year showing a liability for at least some amount of tax or the 2013 tax year was for less than 12 months, do not complete line 23a. Instead, skip line 23a and enter the amount from line 22 on line 23b.

Line 24. Installment Due Dates

Calendar-year taxpayers: Enter 4-15-2014, 6-16-2014, 9-15-2014, and 12-15-2014, respectively, in columns (a) through (d).

Fiscal-year taxpayers: Enter the 15th day of the 4th, 6th, 9th, and 12th months of your tax year in columns (a) through (d). If the due date falls on a Saturday, Sunday, or legal holiday, enter the next business day.

Line 25. Required Installments

Payments of estimated tax should reflect any 2013 overpayment that the corporation chose to credit against its 2014 tax. The overpayment is credited against unpaid required installments in the order in which the installments are required to be paid.

If the corporation uses the annualized income installment method and/or the adjusted seasonal installment method, or is a "large corporation," see the instructions below.

Annualized income installment method and/or adjusted seasonal installment method.   If the corporation's income is expected to vary during the year because, for example, it operates its business on a seasonal basis, it may be able to lower the amount of one or more required installments by using the annualized income installment method and/or the adjusted seasonal installment method. For example, a ski shop, which receives most of its income during the winter months, may be able to benefit from using one or both of these methods in figuring one or more of its required installments.

  To use one or both of these methods, complete Schedule A. If Schedule A is used for any payment date, it must be used for all payment due dates. To get the amount of each required installment, Schedule A automatically selects the smallest of (a) the annualized income installment (if applicable), (b) the adjusted seasonal installment (if applicable), or (c) the regular installment under section 6655(d)(1) (increased by any recapture of a reduction in a required installment under section 6655(e)(1)(B)).

Large corporations.   A large corporation is a corporation that had, or whose predecessor had, taxable income of $1 million or more for any of the 3 tax years immediately preceding the 2014 tax year, or if less, the number of years the corporation has been in existence. For this purpose, taxable income is modified to exclude net operating loss and capital loss carrybacks or carryovers. Members of a controlled group, as defined in section 1563, must divide the $1 million amount among themselves according to rules similar to those in section 1561.

  Large corporations figure the amount to enter on line 25 as follows. If Schedule A is used, also follow these instructions to figure the amounts to enter on Schedule A, Part III, line 35.
  • If line 22 is smaller than line 23a: Enter 25% of line 22 in columns (a) through (d) of line 25.

  • If line 23a is smaller than line 22: Enter 25% of line 23a in column (a) of line 25. In column (b), determine the amount to enter as follows:

    1. Subtract line 23a from line 22,

    2. Add the result to the amount on line 22, and

    3. Multiply the result in 2 above by 25% and enter the result in column (b). Enter 25% of line 22 in columns (c) and (d).

Schedule A

If only the adjusted seasonal installment method (Part I) is used, complete Parts I and III of Schedule A. If only the annualized income installment method (Part II) is used, complete Parts II and III. If both methods are used, complete all three parts. Enter in each column on page 1, Part I, line 25, the amounts from the corresponding column of line 38. If Schedule A is used for any payment date, it must be used for all payment dates.

Do not figure any required installment until after the end of the month preceding the due date for that installment.

Extraordinary items.   Generally, under the annualized income installment method, extraordinary items must be taken into account after annualizing the taxable income for the annualization period. Similar rules apply in determining taxable income under the adjusted seasonal installment method. An extraordinary item includes:
  • Any item identified in Regulations section 1.1502-76(b)(2)(ii)(C)(1), (2), (3), (4), (7), and (8);

  • A net operating loss carryover;

  • A section 481(a) adjustment; and

  • Net gain or loss from the disposition of 25% or more of the fair market value of the corporation's business assets during the tax year.

  These extraordinary items must be accounted for in the appropriate annualization period. However, a net operating loss deduction and a section 481(a) adjustment (unless the corporation makes the alternative choice under Regulations section 1.6655-2(f)(ii)(C)) are treated as extraordinary items occurring on the first day of the tax year in which the item is taken into account in determining taxable income.

De minimis rule.

Extraordinary items identified above that are less than $1,000,000 (other than a net operating loss carryover or a section 481(a) adjustment) may be annualized using the general rules of Regulations section 1.6655-2(f), or if the corporation chooses, may be taken into account after annualizing the taxable income for the annualization period.

For more information regarding extraordinary items, see Regulations section 1.6655-2(f)(ii) and the examples in Regulations section 1.6655-2(f)(vii). Also see Regulations section 1.6655-3(d)(3).

Part I. Adjusted Seasonal Installment Method

Complete this part only if the corporation's base period percentage for any 6 consecutive months of the tax year equals or exceeds 70% (.70). Figure the base period percentage using the 6-month period in which the corporation normally receives the largest part of its taxable income. The base period percentage for any period of 6 consecutive months is the average of the three percentages figured by dividing the taxable income for the corresponding 6-consecutive-month period in each of the 3 preceding tax years by the taxable income for each of their respective tax years.

Example.

An amusement park with a calendar year as its tax year receives the largest part of its taxable income during the 6-month period from May through October. To compute its base period percentage for this 6-month period in 2014, the amusement park figures its taxable income for each May–October period in 2011, 2012, and 2013. It then divides the taxable income for each May–October period by the total taxable income for that particular tax year. The resulting percentages are 69% (.69) for May–October 2011, 74% (.74) for May–October 2012, and 67% (.67) for May–October 2013. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May through October 2014 is 70%. Therefore, the amusement park qualifies for the adjusted seasonal installment method.

Line 2

If the corporation has certain extraordinary items, special rules apply. Do not include on line 2 the de minimis extraordinary items that the corporation chooses to include on line 9b. See Extraordinary items above.

Line 9b

If the corporation has extraordinary items of $1,000,000 or more, a net operating loss deduction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 9b for the appropriate period. Also include on line 9b the de minimis items that the corporation chooses to exclude from line 2. See Extraordinary items above.

Line 10

Figure the tax on the amount on line 9c by following the same steps used to figure the tax on Form 1120-W, page 1, line 14.

Line 15. Alternative Minimum Tax

The corporation may owe AMT unless it will be a “small corporation” exempt from the AMT under section 55(e) for its 2014 tax year. To figure the AMT, use the 2013 Form 4626 and its instructions as a guide. Figure alternative minimum taxable income (AMTI) using income and deductions for the months shown in the column headings above line 1. Divide the AMTI by the amounts on line 8 before subtracting the exemption amount. Multiply that result by 20% and subtract any AMT foreign tax credit plus the amount on line 10 to arrive at the AMT. For columns (a) through (c), multiply the AMT by the amount shown on line 13.

Line 16. Other Taxes

For the same taxes used to figure page 1, Part I, line 19, figure the amounts for the months shown in the column headings above line 1.

Line 18. Credits

Enter the credits to which the corporation is entitled for the months shown in the column headings above line 1.

Part II. Annualized Income Installment Method

Line 20. Annualization Periods

Enter in the space on line 20, columns (a) through (d), respectively, the annualization periods that the corporation is using, based on the options listed below. For example, if the corporation elects Option 1, enter on line 20 the annualization periods 2, 4, 7, and 10, in columns (a) through (d), respectively.

Use Option 1 or Option 2 only if the corporation elected to use one of these options by filing Form 8842, Election To Use Different Annualization Periods for Corporate Estimated Tax, on or before the due date of the first required installment payment. Once made, the election is irrevocable for the particular tax year.

  1st 
Installment
2nd 
Installment
3rd 
Installment
4th 
Installment
Standard option 3 3 6 9
Option 1 2 4 7 10
Option 2 3 5 8 11

Line 21. Taxable Income

If a corporation has income includible under section 951(a) (controlled foreign corporation income), special rules apply.

Amounts includible in income under section 951(a) generally must be taken into account in figuring the amount of any annualized income installment as the income is earned. The amounts are figured in a manner similar to the way in which partnership income inclusions are taken into account in figuring a partner's annualized income installments as provided in Regulations section 1.6654-2(d)(2).

Safe harbor election.   Corporations may be able to make a prior year safe harbor election. Under the election, an eligible corporation is treated as having received ratably during the tax year items of income under section 951(a) equal to 115% (100% for a noncontrolling shareholder) of the amounts shown on the corporation's return for the first preceding tax year (the second preceding tax year for the first and second required installments).

  For more information, see section 6655(e)(4)(B) and Regulations section 1.6655-2(f)(3)(v)(B)(2).

Extraordinary items.   If the corporation has extraordinary items, special rules apply. Do not include on line 21 the de minimis extraordinary items that the corporation chooses to include on line 23b. See Extraordinary items earlier.

Line 22. Annualization Amounts

Enter the annualization amounts for the option used on line 20. For example, if the corporation elects Option 1, enter on line 22 the annualization amounts 6, 3, 1.71429, and 1.2, in columns (a) through (d), respectively.

  1st 
Installment
2nd 
Installment
3rd 
Installment
4th 
Installment
Standard option 4 4 2 1.33333
Option 1 6 3 1.71429 1.2
Option 2 4 2.4 1.5 1.09091

Line 23b

If the corporation has certain extraordinary items of $1,000,000 or more, a net operating loss deduction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 23b. Also include on line 23b the de minimis extraordinary items that the corporation chooses to exclude from line 21. See Extraordinary items earlier.

Line 24

Figure the tax on the amount in each column on line 23c by following the same steps used to figure the tax on Form 1120-W, page 1, line 14.

Line 25. Alternative Minimum Tax

The corporation may owe AMT unless it will be a “small corporation” exempt from the AMT under section 55(e) for its 2014 tax year. To figure the AMT, use the 2013 Form 4626 and its instructions as a guide. Figure AMTI using income and deductions for the annualization period entered in each column on line 20. Multiply the AMTI by the annualization amounts on line 22 before subtracting the exemption amount. Multiply that result by 20% and subtract any AMT foreign tax credit plus the amount on line 24 to arrive at the AMT.

Line 26. Other Taxes

For the same taxes used to figure line 19 of Form 1120-W, figure the amounts for the months shown on line 20.

Line 28. Credits

Enter the credits to which the corporation is entitled for the months shown in each column on line 20. Do not annualize any credit. However, when figuring the credits, annualize any item of income or deduction used to figure the credit.

Part III. Required Installments

Line 33

Before completing line 33 in columns (b) through (d), complete lines 34 through 38 in each of the preceding columns. For example, complete lines 34 through 38 in column (a) before completing line 33 in column (b).

Line 35

Large corporations,” see the instructions for page 1, line 25, for the amount to enter.

Line 38. Required Installments

For each installment, enter the smaller of line 34 or line 37 on line 38. Also enter the result on page 1, Part I, line 25.


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