|
Posted by ed on March 8, 2008, 7:22 pm
Please log in for more thread options > In misc.taxes.moderated, John Levine wrote:
>
> >>My inclination is to make tiny quarterly payments, increasing them if
> >>prospects inprove. If the year turns out well I will have penalties,
> >>but I guess I will be glad to see them.
>
> >>Is there a proper way to handle this?
>
> >Each quarter you extrapolate your full year income from your income to
> >date, then refigure the tax due, and pay enough so that payment N
> >brings you up to N/4 of what the total tax will be. If the payments
> >end up being notably uneven, when you file your tax return you include
> >form 2210 including schedule AI to explain why.
>
> I did that once when a company got bought-out in December. I decided
> filled out 2210 in a tax program entering a lot of data. Then it
> wanted a whole other set of data. You have to split your income into
> quarters, and you have to split your deductions into quarters. Guess
> what? Some of the deductions happened to fall into Q4. And my
> methods were not all that efficient Since I had "invested" so much
> time into form 2210 already, I went ahead. There might have been a
> third phase. Not sure.
>
> Well, since extra income gets taxed at a higher rate, there was
> still a penalty. So I think I might have paid $20 in penalty vs the
> $30 I would have paid if I had not gone thru that.
>
>
>
> >Publication 505 sort of explains this, as do the instructions for forms
> >1040-ES and 2210.
>
> --
> << ------------------------------------------------------- >>
> << 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 atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
To avoid a penalty and pay the least amount possible each quarter yolu
shojld use the ANnuyalized Income Method. You can get a *2210 tax
calculator* on the web that does all the calulatiions for you and
provides all the line number entries for the 2210 and its AI.
If you are not making much income stating itit quarterly shouldn't be
such a big job.
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. >>
<< ------------------------------------------------------- >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap