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Subject Author Date
Re: estimated taxes safe harbor Brew1 09-05-2007
Posted by Brew1 on September 5, 2007, 10:58 am
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 Keep in mind: unless you make 4 EQUAL payments (and it's too
late in the year to accomplish that), you can be charged
with underpayment even if you paid in 90% of current
liability. Better to try and pay in 100% of your estimated
liability and, when you prepare your taxes, use the
annualized method if income was greater in the second half
of the year.

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<< 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. >>
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Posted by Mark Freeland on September 6, 2007, 4:10 am
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> Keep in mind: unless you make 4 EQUAL payments (and it's too
> late in the year to accomplish that), you can be charged
> with underpayment even if you paid in 90% of current
> liability.

Always one for trying creative solutions (but still well
within the borders of the law), would the following work?

Make an IRA withdrawal (distribution) to make up estimate
shortfall (plus some cushion); Have the IRA
custodian/trustee withhold the entire distribution for
taxes; Within 60 days, pay into the IRA the same amount as
distributed/withheld.

Since withholdings (as opposed to estimates) don't have to
be evenly spread out during the year, this provides a last
minute "fix up" for total estimates/withholding. Since the
equivalent amount is redeposited in the IRA within 60 days,
the rollover is a non-taxable event, and no penalty. The IRS
allows you to do a rollover into the same IRA, so that's not
an issue. Of course there is the warning that you can't do
this more than once a year, per IRA.

> when you prepare your taxes, use the
> annualized method if income was greater in the second half
> of the year.

Been there, done that. Not worth the effort in the detailed
bookkeeping if there's a better way.

Mark Freeland
BnetOnewsX@sbcglobal.net

<< ------------------------------------------------------- >>
<< 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 Arthur Kamlet on September 6, 2007, 9:34 pm
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> Always one for trying creative solutions (but still well
> within the borders of the law), would the following work?
>
> Make an IRA withdrawal (distribution) to make up estimate
> shortfall (plus some cushion); Have the IRA
> custodian/trustee withhold the entire distribution for
> taxes; Within 60 days, pay into the IRA the same amount as
> distributed/withheld.

I seriously doubt the IRA custodian will withhold more than
25% as taxes, but 25% is better than none.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- >>
<< 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 Mark Freeland on September 8, 2007, 12:26 am
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> I seriously doubt the IRA custodian will withhold more than
> 25% as taxes, but 25% is better than none.

Thanks for the reply (which I read as affirmative, assuming
that the custodian will honor the withholding request).

FWIW, my father used to have 100% of a petty pension
distribution withheld. More on point, Fidelity's IRA
withdrawal form instructs you to specify for fed withholding
a whole number percentage between 10 and 99. So it seems
they won't withhold the whole withdrawal, but they're
willing to come darn close.

http://personal.fidelity.com/accounts/pdf/mrd2.pdf (Fidelity IRA Withdrawal
Request Instr. and Form)

Mark Freeland
BnetOnewsX@sbcglobal.net

<< ------------------------------------------------------- >>
<< 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 Arthur Kamlet on September 9, 2007, 10:09 pm
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>> I seriously doubt the IRA custodian will withhold more than
>> 25% as taxes, but 25% is better than none.

> Thanks for the reply (which I read as affirmative, assuming
> that the custodian will honor the withholding request).
>
> FWIW, my father used to have 100% of a petty pension
> distribution withheld. More on point, Fidelity's IRA
> withdrawal form instructs you to specify for fed withholding
> a whole number percentage between 10 and 99. So it seems
> they won't withhold the whole withdrawal, but they're
> willing to come darn close.
>
> http://personal.fidelity.com/accounts/pdf/mrd2.pdf (Fidelity IRA Withdrawal
> Request Instr. and Form)

OK - if they will w/h 99% hen go for it.

T`he IRS e-file standards (Pub 1345a) will not allow you to e-file
when 50% or more of your gross Form 1099 distribution is withheld
as taxes. Not a big deal, just a nasty surprise if you were
hoping to e-file.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- >>
<< 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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