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Posted by ed on December 7, 2006, 8:30 am
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Ted wrote:
>> Ted wrote:
>>> I am expecting a huge capital gains in a few weeks. If I put
>>> it off until after the first would I get to hold onto the
>>> taxes for an additional 12 months, or would I be obligated
>>> to pay some sort of estimated taxes as soon as I get it? I
>>> have already paid estimated taxes based on my 2005 income,
>>> but this will be 50X higher.
>> If you make the gain in 2006 you can wait to pay the taxes
>> on it until April `5, 2007 without any penalty. If you take
>> the gain in January 2007 the taxes on the gain will be due
>> April 15, 2008 and there will be no penaltyy as long as you
>> pay estimates in 2007 each equal to 1/4 of your 2006 tax
>> (110% if AGI in 2006 is over $150,000 and $75,000 if you are
>> filing MFS).
> Thanks, but that brings up another question.
> My 2005 AGI was $157,000. I paid 50% of my estimated taxes
> on 4/15/06 and 50% on 10/15/06.
>
> I am expecting my 2006 income to be significantly higher,
> even if I defer the income referred to originally. Since my
> 2005 income is over $150k and I only paid 100% of the
> estimated taxes am I vulnerable to a penalty? TaxCut said to
> pay 100%, but I guess that is why it is $14.
>
> I quickly ran my information through TaxCut and it came up
> with a $55 penalty; presumably because I paid 100% rather
> than 110%. If that is all there is, it is not a big deal;
> but if TaxCut is wrong about the penalty size also, I can
> always pay the other 10% by 1/15/07 and be okay, right?
Steve is wrong. As long as he had paid as much as his 2005
tax, in equal installments, there's no penalty if he takes
the gain in 2006 and waits until April 2007 to pay the rest
of his tax due for 2006.
However, we now find that he didn't meet the 110%
requirement so if even if he pays the other 10% by Jan 15,
2007 he'll have a penalty even if he completes form 2210
Schedule AI, unless his annualized tax on 90% of 2006
income, prior to September 1, 2006, is less than 100% of
2005 tax. So, he can't just "pay the other 10% by Jan 15"
and avoid a penalty.
ed
If he takes the gain in early 2007 the due date is April
2008 if he pays 4 equal installments of 1/4 of 110% of his
2006 taxes (assuming AGI for 2006 is over $150,000). There
isn't a problem paying 50% of his estimates (whatever they
are supposed to be) on April 15 but the other 50% (or 25%)
is due September 15, not October 15, creating a penalty of
8% simple interest for a month
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