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Subject Author Date
Estimated tax payment. PeterL 04-12-2008
Posted by PeterL on April 12, 2008, 4:59 pm
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 Once again I find myself owing a significant amount to the IRS, mainly
because I didn't pay estimate tax. I have a regular income where
taxes are withheld. I also have significant but irregular capital
gains and taxable interests. I don't mind paying the penalty, which
is insignificant. But wifey don't want to.

So for next year, how can I go about paying estimate tax, not knowing
what my capital gains will likely be?

--
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Posted by Barry Margolin on April 12, 2008, 5:10 pm
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 In article

> Once again I find myself owing a significant amount to the IRS, mainly
> because I didn't pay estimate tax. I have a regular income where
> taxes are withheld. I also have significant but irregular capital
> gains and taxable interests. I don't mind paying the penalty, which
> is insignificant. But wifey don't want to.
>
> So for next year, how can I go about paying estimate tax, not knowing
> what my capital gains will likely be?

If these are mutual funds, they will often notify shareholders if they
expect to be making unusually large capital gain distributions at the
end of the year. If they don't warn you proactively, you can call them
a few weeks before their usual distribution dates, and ask them for an
estimate.

--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Ernie Klein on April 12, 2008, 5:28 pm
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In article

> Once again I find myself owing a significant amount to the IRS, mainly
> because I didn't pay estimate tax. I have a regular income where
> taxes are withheld. I also have significant but irregular capital
> gains and taxable interests. I don't mind paying the penalty, which
> is insignificant. But wifey don't want to.
>
> So for next year, how can I go about paying estimate tax, not knowing
> what my capital gains will likely be?

One never knows for sure, that's why it is "estimated". I give it my
best guess and round up a bit so that I will be sure to pay 110% of the
previous years taxes (safe harbor amount), based on previous years
taxes. If you do have unexpected income in a given quarter or have a
lower than expected withholding, so that you will not fall under the
safe harbor, you can always increase the amount of estimated payment for
that quarter, but if you do that, be sure to file a 2210 form
(Annualized income installment method) to avoid any penalty for nat
making equal payments.

--
-Ernie-

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by rick++ on April 13, 2008, 4:06 pm
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> One never knows for sure, that's why it is "estimated".

Its only "estimated" because the 2008 tax brackets wont
be set for another 6 months. Most likely they will be more generous
than now due to inflation. Otherwise you can compute your
necessary tax exactly according to 2007 tax laws.

I use my $15 TurboTax program to compute a column of
2210 penalty form- each quarter. Essentially
you print your paycheck and every income producing account
on April 1, June 1, Sept 1 and Jan 1 and ype this into the 2210.
If your broker breaks out the long term gains and dividend parts,
Turbos Tax handles this too. If the 2210 shows a tax deficiency,
I round up the deficent amount to the nearest hundred and
debit that to my electronic IRS account.
Be sure to update your 2210 with the paid estimate,
so you are ready for the next quarter.
The only problem with Turbo Tax is I cant feed a 2007 tax return
into a 2007 2210 form (only accepts a 2006 tax return).
So I have to override those numbers with control-R on the 2210.
Should I get a penalty-due letter from the IRS, I have
seend them my 2210 then to delete it (and they do so).

If you receive most of your untaxed income early in the year,
you keep your money longer if you use the equal-quarters method
of computing the penalty.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by ed on April 14, 2008, 10:41 pm
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> > One never knows for sure, that's why it is "estimated".
>
> Its only "estimated" because the 2008 tax brackets wont
> be set for another 6 months. Most likely they will be more generous
> than now due to inflation.  Otherwise you can compute your
> necessary tax exactly according to 2007 tax laws.
>
> I use my $15 TurboTax program to compute a column of
> 2210 penalty form- each quarter.  Essentially
> you print your paycheck and every income producing account
> on April 1, June 1, Sept 1 and Jan 1 and ype this into the 2210.
> If your broker breaks out the long term gains and dividend parts,
> Turbos Tax handles this too.  If the 2210 shows a tax deficiency,
> I round up the deficent amount to the nearest hundred and
> debit that to my electronic IRS account.
> Be sure to update your 2210 with the paid estimate,
> so you are ready for the next quarter.
> The only problem with Turbo Tax is I cant feed a 2007 tax return
> into a 2007 2210 form (only accepts a 2006 tax return).
> So I have to override those numbers with control-R on the 2210.
> Should I get a penalty-due letter from the IRS, I have
> seend them my 2210 then to delete it (and they do so).
>
> If you receive most of your untaxed income early in the year,
> you keep your money longer if you use the equal-quarters method
> of computing the penalty.

Rick. 2008 tax rates have been available since late 2007, along with
all the phase-out constants. It's just that TT does';t have them.
Using 2007 TT the way you are is bad news if you are in AMT land, and
as you know is using 2007 rates and constants. Why not just get a
real 2210 tax calculator downloaded from the web and do it right.

ed

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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