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Posted by ed on June 12, 2008, 11:39 pm
Please log in for more thread options On Jun 12, 9:57 pm, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
> On Jun 12, 6:51 pm, derk...@gmail.com wrote:
>
> > I'm trying to understand the implications of the 100k payment on
> > my 2008 federal and state taxes. There are two areas that I have
> > identified as likely sticky points.
>
> > 1. Payment of estimated taxes in 2008
>
> > Since I have a 100k deduction available, I would like not to
> > pay estimated taxes in 2008 until I reach 100k worth of
> > income/gains. Is this a reasonable approach for fed and state
> > estimated taxes?
>
> No, because of AMT. If you expect your net income this year to be
> 100K, then likely you're not in AMT and your taxable income will be
> $0. You have to run the numbers through a computer program.
>
> > I further plan on using irs.form2210/2210AI and the
> > "annualized" method to avoid troubles with underpayments of
> > estimated tax if income/gains arrive unevenly (and I think
> > they will).
>
> There is a thread "Estimated Tax Issue (Hypothetical)" going on right
> now in this newsgroup. You can read it for additional info if you
> want.
>
> > 2. AMT in 2008
>
> > With the big whopping 100k deduction being a tax preference
> > item for AMT, I think I risk that AMT will be larger than
> > regular tax in 2008, and hence take effect. If this occurs,
> > will AMT then lead to penalties for underpayments, since per
> > assumption I did not make estimated tax payments in some or
> > all quarters?
>
> When you fill out Schedule AI of form 2210, you will be asked to
> compute your tax for each quarter, and to do this you use the usual
> method -- which includes AMT, foreign tax credit, etc. Say for the
> first quarter (January to March 31) you had 40k AGI of which 5k was
> qualified dividends, and the foreign tax credit was $200, and CA state
> tax paid was 4k. Annualize the numbers by multiplying by 4; this
> gives you 160k AGI, of which 20k qualified dividends, $800 foreign tax
> credit, 16k CA state tax. Calculate the tax on this annualized amount
> using regular form 1040. Then divided it by 4 to get the first
> quarter installment, but as you only have to pay 90% of the tax due,
> multiply this quarter tax by 90%; or in other words multiply the
> annualized tax by 22.5%.
I suggest you download a form 2210 tax calculator instead of trying to
do this manually. Your $100,000 state tax deduction will make a huge
difference, and could push you into AMT territory. The calculator
will compute all this.
ed
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