Current through February 26, 2024
(1) GENERAL. Under
ss.
71.09
and
71.29,
Stats., certain corporations and persons other than corporations shall make
estimated tax payments. For short taxable years, estimated tax payments shall
be made in accordance with this section.
Note: For taxable years beginning on or after
January 1, 1994, and ending before April 1, 1999, estimated tax includes the
temporary recycling surcharge under s.
77.93,
Stats.
(2) DEFINITIONS. In
this section:
(a) "Corporation" includes
corporations, tax-option (S) corporations, insurance companies, publicly traded
partnerships treated as corporations in section 7704 of the Internal Revenue
Code, limited liability companies treated as corporations under the Internal
Revenue Code, joint stock companies, associations, common law trusts, regulated
investment companies, real estate investment trusts, real estate mortgage
investment conduits, nuclear decommissioning trust funds and virtually exempt
entities as defined in s.
71.29(1)
(c), Stats.
(b) "Estimated tax payable" means the amount
calculated under s.
71.09(13)
or
71.29(9) or
(10), Stats.
(c) "Persons other than corporations"
includes individuals, estates, trusts other than those treated as corporations
in par. (a), partnerships except publicly traded partnerships treated as
corporations in section 7704 of the Internal Revenue Code and limited liability
companies treated as partnerships under the Internal Revenue Code.
(d) "Short taxable year" means a period of
less than 12 months.
(3)
NUMBER OF INSTALLMENT PAYMENTS REQUIRED.
(a)
For short taxable years, the following number of estimated tax installment
payments shall be made:
1. For periods of one
month or less, none.
2. For periods
of 2 to 3 months, one.
3. For
periods of 4 to 6 months, 2.
4. For
periods of 7 to 9 months, 3.
5. For
periods of 10 to 11 months, 4.
(b) Except as provided in par. (c), for
purposes of determining the required number of estimated tax installment
payments under par. (a), a portion of a month shall be treated as a full month.
(c) If a short taxable year
terminates before the end of a month and another taxable year begins at that
time, for estimated tax installment purposes the first taxable period shall be
treated as ending on the last day of that month and the second taxable period
shall be treated as beginning on the first day of the following month.
Note: Refer to the examples of the estimated tax
payment requirements for short taxable years involving a portion of a month
that follow sub. (7) (b) 4.
(4) DUE DATES OF INSTALLMENT PAYMENTS FOR
CORPORATIONS. For short taxable years, corporations, or the designated agent as
provided in s.
Tax 2.65(3) (a)
5., shall make estimated tax installment
payments on or before the 15th day of each of the following months:
(a) For periods of 2 to 3 months, the last
month of the taxable year.
(b) For
periods of 4 to 6 months, the 4th and last months of the taxable
year.
(c) For periods of 7 to 9
months, the 4th, 6th and last months of the taxable year.
(d) For periods of 10 to 11 months, the 4th,
6th, 9th and last months of the taxable year.
(5) DUE DATES OF INSTALLMENT PAYMENTS FOR
PERSONS OTHER THAN CORPORATIONS.
(a) Except
as provided in pars. (b) and (c), for short taxable years, persons other than
corporations shall make estimated tax installment payments on or before the
15th day of each of the following months:
1.
For periods of 2 to 3 months, the first month following the close of the
taxable year.
2. For periods of 4
to 6 months, the 4th month of the taxable year and the first month following
the close of the taxable year.
3.
For periods of 7 to 9 months, the 4th and 6th months of the taxable year and
the first month following the close of the taxable year.
4. For periods of 10 to 11 months, the 4th,
6th and 9th months of the taxable year and the first month following the close
of the taxable year.
(b)
If a person other than a corporation files an income tax return on or before
the last day of the first month following the close of the taxable year and
pays the full amount computed on that return as payable, that person need not
make the last payment of estimated tax.
(c) Instead of making estimated tax
installment payments, a farmer or fisher as defined in s.
71.09(1)
(a), Stats., may either pay the estimated tax
in full by the 15th day of the first month after the close of the taxable year
or file the tax return on or before the first day of the 3rd month following
the close of the taxable year and pay the full amount computed on that return
as payable.
(6)
COMPUTATION OF ESTIMATED TAX PAYABLE. Corporations and persons other than
corporations shall make estimated tax payments equal to the lesser of the
following amounts:
(a) Ninety percent of the
tax shown on the return for the taxable year or, if no return is filed, 90% of
the tax for the taxable year.
(b)
For individuals, corporations having less than $250,000 of Wisconsin net income
and estates and trusts having less than $20,000 of Wisconsin taxable income for
the current taxable year, the tax shown on the return for the preceding taxable
year, provided the taxpayer filed a return for the preceding year covering a
full 12-month year. When the current year is a short taxable year and the
preceding year was a period of 12 months, the tax shown on the return for the
preceding taxable year may be prorated based on the number of months in the
short taxable year.
Example: Corporation A receives federal approval
to change its taxable year from a calendar year to a fiscal year ending on June
30. To make the change, Corporation A files a franchise or income tax return
for the period beginning January 1 and ending June 30. On this short-period
return, it reports net tax of $8,000. Corporation A's Wisconsin net income for
the current taxable year is less than $250,000. Therefore, its estimated tax
payable is the lesser of 90% of the tax shown on its current year return or
100% of the tax shown on its prior year return, provided it had filed a tax
return for that year covering a 12-month period. The tax shown on Corporation
A's return for the preceding taxable year, a 12-month period, was $6,000.
Corporation A's estimated tax payable for the current taxable year is $3,000,
$6,000 prior year's tax x 6 months/12 months.
Note: Corporations having Wisconsin net income of
$250,000 or more for the current taxable year and estates or trusts having
Wisconsin taxable income of $20,000 or more for the current taxable year may
not calculate their estimated tax payable under par. (b).
(c) Ninety percent of the tax calculated by
annualizing the taxable income earned for the months in the taxable year ending
before the due date of the installment. The following special rules apply:
1. Corporations which determine their
Wisconsin net incomes under the apportionment method may compute their
annualized income using the apportionment percentage from the return filed for
the previous taxable year if the previous year's return is filed by the due
date of the installment for which the income is being annualized and the
apportionment percentage on that return is greater than zero. A corporation
that has at least $250,000 of Wisconsin net income for the current taxable year
may also compute annualized income using the apportionment percentage from the
return filed for the previous taxable year if the previous year's return is
filed by the due date of the 3rd installment, the apportionment percentage on
that return is greater than zero, and the apportionment percentage used in
computing the first 2 installments is not less than the apportionment
percentage used on that return.
2.
Entities subject to tax on unrelated business taxable income and trusts and
estates shall annualize their incomes for the months in the taxable year ending
one month before the installment due date.
(7) PORTION OF ESTIMATED TAX PAYABLE IN EACH
INSTALLMENT. The portion of the estimated tax payable in each installment
depends on when the taxpayer determines that the taxable year will be a period
of less than 12 months and the number of installment payments required, as
follows:
(a) If an event that will terminate
the taxable year before the end of the 12th month occurs after the taxpayer has
begun making estimated tax payments, the initial estimated tax installment
payments shall be based on 25% of the estimated tax payable, with the last
payment adjusted for the difference between the estimated tax liability and the
amount previously paid.
Examples:
1) Corporation B, which has been filing tax
returns on a calendar-year basis, receives federal approval to change its
taxable year to a fiscal year ending on July 31. To make the change,
Corporation B files a franchise or income tax return for the short taxable year
beginning January 1 and ending July 31. Since this is a period of 7 months,
Corporation B must make 3 estimated tax payments. Twenty-five percent of the
estimated tax shall be paid for each of the installments due March 15 and June
15. The balance of the estimated tax shall be paid on or before July 15. If
Corporation B's estimated tax payable is $80,000, Corporation B must pay
$20,000, 25% x $80,000 estimated tax payable, for each of the installments due
March 15 and June 15 and $40,000, 50% x $80,000 estimated tax payable, for the
installment due July 15.
2)
Corporation C, a calendar-year filer, merges into Corporation D on October 6.
As a result, Corporation C files its final franchise or income tax return for
the short taxable year beginning January 1 and ending October 6. Corporation C
must make 4 estimated tax payments, each for 25% of the estimated tax payable.
The installments must be paid on or before March 15, June 15, September 15 and
October 15. If Corporation C's estimated tax payable is $100,000, Corporation C
must pay $25,000, 25% x $100,000 estimated tax payable, for each
installment.
(b) If an
event that will result in a taxable year of less than 12 months occurs before
the taxpayer has begun making estimated tax payments, installment payments
shall be made as follows:
1. If one
installment is due, all of the estimated tax shall be paid at that
time.
2. If 2 installment payments
are due, 75% of the estimated tax shall be paid for the first installment and
25% shall be paid for the remaining installment.
3. If 3 installment payments are due, 50% of
the estimated tax shall be paid for the first installment and 25% shall be paid
for each of the 2 remaining installments.
4. If 4 installment payments are due, 25% of
the estimated tax shall be paid for each installment.
Examples:
1) Corporation E owns 100% of the stock of
Corporation F. The corporations file consolidated federal income tax returns on
a calendar-year basis. On March 10, Corporation E sells all of the stock of
Corporation F to third parties, severing the affiliated group. For federal
purposes, Corporations E and F file a consolidated return for the period from
January 1 through March 10. Corporation F files a separate federal return for
the period from March 11 through December 31. Since the taxable period for
Wisconsin purposes is the same as the federal taxable year, Corporation F must
also file 2 short-period Wisconsin returns. For the first taxable year,
Corporation F must make one estimated tax installment payment for 100% of the
estimated tax liability on or before March 15. For the second short period,
Corporation F must make 3 estimated tax installment payments. The first payment
for 50% of the estimated tax liability is payable on or before June 15. Since
March is the last month of the first short period, April is treated as the
first month of the second short period. The second and third payments, each for
25% of the estimated tax, are due on or before September 15 and December 15,
respectively. If Corporation F's estimated tax for the period beginning March
11 and ending December 31 is $150,000, Corporation F must pay $75,000, 50% x
$150,000 estimated tax payable, for the first installment and $37,500, 25% x
$150,000 estimated tax payable, for each of the remaining 2
installments.
2) Corporation G buys
100% of the stock of Corporation H on August 29. Both corporations compute
their incomes on a calendar-year basis. Corporations G and H file a
consolidated federal income tax return for the period from August 30 through
December 31. Corporation H files a separate federal return for the period from
January 1 through August 29. Since the taxable year is the same for Wisconsin
and federal purposes, Corporation H must file 2 short-period Wisconsin returns.
For the first short taxable year, 3 estimated tax installment payments are
required, due on or before March 15, June 15 and August 15. Twenty-five percent
of the estimated tax shall be paid for each of the installments due March 15
and June 15 and the balance of the estimated tax shall be paid for the
installment due August 15. For the second short period, 2 installments are
payable on or before November 15 and December 15. Since August is the last
month of the first short period, September is treated as the first month of the
second short period. The first installment payment, due November 15 is for 75%
of the estimated tax and the payment due December 15 is for 25% of the
estimated tax.
(8) ANNUALIZED INCOME INSTALLMENT PAYMENTS.
Under ss.
71.09(13)
(d) and
71.29(9)
(c), Stats., taxpayers may compute estimated
tax installment payments by annualizing income for the months in the taxable
year ending before the installment payment's due date. Corporations that are
subject to a tax on unrelated business taxable income and virtually exempt
entities may compute estimated tax installment payments by annualizing income
for the months in the taxable year ending before the date one month before the
due date for the installment payment. Annualized income installment payments
shall be computed as follows:
(a)
Computation of annualized income. Taxpayers shall annualize
income for the annualization period as follows:
1. Compute the Wisconsin net income for the
annualization period, excluding adjustments which remain constant from period
to period, such as net business loss carryforwards and the amortization of
adjustments for changes in the method of accounting.
2. Calculate the annualization factor for the
annualization period by dividing the number of months in the taxable year by
the number of months in the annualization period.
3. Multiply the amount computed in subd. 1.
by the annualization factor computed in subd. 2.
4. Subtract from the result in subd. 3. any
adjustments excluded from the calculation of Wisconsin net income in subd. 1.
which remain constant for each period. Individuals shall also subtract the
standard deduction.
Example: Corporation J's taxable year begins
January 1 and ends May 10. It has Wisconsin net income of $200,000 for the
period from January 1 through February 28. Corporation J's annualization factor
for that period is 2.5, calculated by dividing the 5 months of the taxable year
by the 2 months of the annualization period. The annualized income for that
period is $500,000, which is $200,000 Wisconsin net income x 2.5 annualization
factor.
(b)
Computation of installment payments. Taxpayers shall calculate their estimated
tax installment payments based on annualized income for the annualization
period as follows:
1. Determine the gross tax
on the amount calculated under par. (a).
2. Subtract from the gross tax under subd. 1.
any allowable tax credits, excluding estimated tax paid.
3. Multiply the net tax computed in subd. 2.
by the applicable percentage from sub. (7).
Example: Corporation K, a calendar year filer,
merges into Corporation L on July 14. Corporation K elects the annualized
income method for determining whether it paid sufficient estimated tax.
Corporation K's Wisconsin net income is $300,000 for the first 2 months of the
taxable year, $1,400,000 for the first 5 months of the taxable year, and
$1,800,000 for the first 6 months of the taxable year. Corporation K has $9,000
of tax credits and its net tax due for the year ending July 14 is $135,000.
Therefore, Corporation K's estimated tax payable is $121,500. For Corporation
K's 7-month year, the annualization factors are 3.5 (7 months/2 months), 1.4 (7
months/5 months), and 1.167 (7 months/6 months). Corporation K calculates its
required estimated tax payments as follows:
|
First 2 months
|
First 5 months
|
First 6 months
|
|
Wisconsin net income
|
$300,000
|
$ 1,400,000
|
$1,800,000
|
|
Annualization factor
|
3.5
|
1.4
|
1.167
|
|
Annualized income
|
$1,050,000
|
$ 1,960,000
|
$2,100,600
|
|
Annualized gross tax
|
82,950
|
154,840
|
165,947
|
|
Tax credits
|
9,000
|
9,000
|
9,000
|
|
Annualized net tax
|
$ 73,950
|
$ 145,840
|
$156,947
|
|
Applicable percentage
|
22.5%
|
45%
|
90%
|
|
Portion of annualized tax
|
$ 16,639
|
$65,628
|
$141,252
|
|
25% of estimated tax
|
30,375
|
60,750
|
121,500
|
|
Amount payable in preceding periods
|
0
|
16,639
|
60,750
|
|
Installment payable
|
$ 16,639
|
$44,111
|
$ 60,750
|
Note: After the end of the taxable year, persons
other than corporations shall use schedule U and corporations shall use form 4U
to determine whether they have made sufficient estimated tax payments.
Taxpayers with short taxable years shall adjust the computations on those forms
as provided in this section.
(9) COMBINED GROUPS. For purposes of
estimated tax requirements, a combined group of corporations under s.
71.255(1)
(a), Stats., or a commonly controlled group
under s.
71.255(2m),
Stats., shall be treated as if it were a single corporation.
See s. Ta x 2.66 for rules relating to the payment of
estimated taxes by combined groups.
Note: Section Tax 2.89 interprets ss.
71.09(9),
71.255(7),
and
71.29(5),
Stats.
See s.
Tax
2.60 for combined reporting definitions relating to
this section. See s.
Tax
2.63 for rules relating to the controlled group
election under s.
71.255(2m),
Stats. See s.
Tax
2.65 for rules relating to the designated agent. See
s.
Tax
2.66 for rules relating to the payment of estimated
taxes by combined groups.
