TCP, Tax Compliance and Planning

Sources for Individual Planning: Estimated Taxes, Income Timing, and AMT

Last reviewed 2026-10-08

The standards and authorities behind PocketCPA's TCP lessons on Individual Planning: Estimated Taxes, Income Timing, and AMT. The topic rests on IRC Sec. 6654, 6621, 6665, 275, 55, 56, 57, 53, 1411, 453, 108, 199A, 1202(e)(3), 469(h).

About this topic

Individual planning is about deciding how much to pay, and when, before the year closes. Everything here is arithmetic run through a rule.

Work every rule with numbers, and prove each answer by showing that the pieces sum to the total.

Key points

Estimated tax payments are required when withholding and credits will fall short of the tax liability.
The safe harbor avoids the estimated tax penalty: pay 100% of the prior year's tax (110% for higher-income taxpayers).
Income timing strategies shift income to lower-rate years and accelerate deductions into higher-rate years.
The alternative minimum tax (AMT) adds back preference items and applies a flat rate to AMTI above the exemption.

What the lessons cover

Estimated tax and the safe harbors
Estimated tax: the exceptions, and withholding's backward reach
Estimated tax: annualizing, the charge, and the special regimes
Income timing and AGI management
AMT planning
The qualified business income deduction (Sec. 199A)
The net investment income tax (Sec. 1411)
Building AMTI: the Sec. 56 adjustments and the Sec. 57 preferences
The Sec. 53 minimum tax credit
Cancellation of debt income and the insolvency exclusion (Sec. 108)
A full-year planning tie-out

Authoritative references

Estimated tax, Sec. 6654:

Sec. 6654(a), the addition to tax, computed by applying the underpayment rate to the underpayment for the period.
Sec. 6654(b)(1) through (b)(3), the underpayment as the required installment over the amount paid by the due date, the period running to the earlier of April 15 or payment, and the crediting of payments against unpaid installments in the order due.
Sec. 6654(c)(1) and (c)(2), four installments with fixed due dates.
Sec. 6654(d)(1), the required installment as 25 percent of the required annual payment; (d)(1)(B) defines that payment as the lesser of 90 percent of the current-year tax or the prior-year prong; (d)(1)(C) raises the prior-year prong to 110 percent where prior-year AGI exceeds $150,000 ($75,000 for a married individual filing separately), with AGI for an estate or trust determined under Sec. 67(e).
Sec. 6654(d)(2), the annualized income installment, with the applicable percentages at (d)(2)(C)(ii) and the recapture of any reduction into the next installment at (d)(2)(A)(ii).
Sec. 6654(e), the exceptions: (e)(1) the small-amount exception, (e)(2) no liability in the preceding full year, and (e)(3) the waivers for casualty, disaster, or unusual circumstances and for retirement or disability.
Sec. 6654(f) and (g), the definition of tax for the section, and withholding deemed paid ratably on each due date, with the separate treatment of wage and other withholding at (g)(2).
Sec. 6654(h), the January 31 escape from the fourth installment.
Sec. 6654(i), (j), (k) and (l), farmers and fishermen, nonresident aliens described in Sec. 6072(c), fiscal-year taxpayers, and estates and trusts, with an estate within two years of death outside the section.
Sec. 6654(m), the Additional Medicare Tax under Sec. 3101(b)(2), treated as a chapter 2 tax to the extent not withheld.
Sec. 6621(a)(2) and (b), the underpayment rate: the federal short-term rate plus 3 percentage points, rounded to the nearest full percent, with the section-specific rule at (b)(2)(B).
Sec. 6665(a), additions to tax payable and collectible as taxes, and Sec. 275(a)(1), the bar on deducting federal income taxes, so the addition is not deductible.

Alternative minimum tax:

Sec. 55(a) and (b)(1), the tax imposed in addition to other tax, the 26 and 28 percent rates on the taxable excess, the taxable excess as AMTI over the exemption amount, the halved breakpoint for a married individual filing separately, and AMTI as taxable income with the Sec. 56 and Sec. 58 adjustments and the Sec. 57 preferences.
Sec. 55(b)(3), preservation of the preferential rates through the Sec. 1(h) structure.
Sec. 55(c)(1), the regular tax for the comparison.
Sec. 55(d), the exemption amounts, their indexing at (d)(3) and (d)(4), the phase-out at 25 percent of AMTI over the threshold, and the 50 percent rate and $1,000,000 threshold substituted for tax years after 2025 by Pub. L. 119-21, Sec. 70107.
Sec. 56(a)(1), (b)(1), (b)(2) and (e), the depreciation adjustment, the disallowance of miscellaneous itemized deductions and state and local taxes, qualified housing interest, the disallowed standard deduction and personal exemption, the inapplicability of Sec. 68, and the amortization of circulation and research expenditures.
Sec. 56(b)(3) with Sec. 422(c)(2), the incentive stock option bargain element, with Sec. 421 not applying to the transfer.
Sec. 57(a), the preferences: depletion, intangible drilling costs, private activity bond interest at (a)(5), pre-1987 accelerated depreciation, and the small business stock exclusion at (a)(7).
Sec. 53(a) through (d), the minimum tax credit, its limit by the excess of regular tax over tentative minimum tax, and the net minimum tax from which exclusion items generate no credit.

Net investment income tax and the qualified business income deduction:

Sec. 1411(a), (b) and (d), the 3.8 percent tax on the lesser of net investment income or the excess of modified AGI over the threshold, with modified AGI adding the Sec. 911(a)(1) exclusion, and the parallel rule for an estate or trust at (a)(2).
Sec. 1411(c), net investment income: the three-part list at (c)(1), the passive and trading businesses at (c)(2), working capital at (c)(3), the disposition of partnership and S corporation interests at (c)(4), and the exclusions for retirement plan distributions at (c)(5) and self-employment income at (c)(6).
Sec. 1411(e), the exclusion of nonresident aliens and charitable trusts.
Sec. 199A(a), (b)(1), (b)(2) and (b)(3), the deduction as the lesser of the combined qualified business income amount or 20 percent of taxable income less net capital gain, with the wage and property limit and its phase-in.
Sec. 199A(b)(4) and (b)(6), W-2 wages and qualified property, and (c), qualified business income, including the exclusions at (c)(3)(B) and (c)(4).
Sec. 199A(d)(1) through (d)(3), the qualified trade or business, the specified service trade or business drawn from Sec. 1202(e)(3)(A), and the phase-out relief.
Sec. 199A(e)(2), the threshold amount and the $75,000 or $150,000 band.
Sec. 199A(f)(1)(A), application at the partner or shareholder level.
Sec. 199A(i), the $400 minimum deduction for an applicable taxpayer with at least $1,000 of qualified business income from an active business, enacted by Pub. L. 119-21, Sec. 70105.
Sec. 469(h), material participation, and Sec. 475(c)(2) and (e)(2), trading in securities, partnership interests, or commodities.

Income timing and cancellation of debt:

Sec. 453(a) through (e) and (i), the installment method, the definition of an installment sale and the dealer exclusion, the gross profit formula, the election out and its revocation, the related-party second disposition within two years, and recapture income recognized in the year of sale.
Sec. 108(a)(1) through (a)(3), the exclusions for bankruptcy, insolvency, and other discharges, their priority, and the cap of the insolvency exclusion at the amount of insolvency.
Sec. 108(b), the reduction of tax attributes in the order of (b)(2)(A) through (G), at one dollar per dollar or 33 1/3 cents for credits, and the election at (b)(5) to reduce basis first.
Sec. 108(d)(3), (d)(6) and (d)(7), insolvency measured immediately before the discharge, and application at the partner and S corporation levels.

How PocketCPA uses these sources

Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.