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Posted by ed on April 28, 2008, 6:56 pm
Please log in for more thread options On Apr 28, 4:41 pm, an_ordinary_guy_...@hotmail.com (Bill) wrote:
> Willl...@naol.com (Jeff) posted:
>
> >How much should I pay for estimated Fed
> >taxes so that I do not owe a penalty if my
> >income next year is higher than in 2007?
> >Is it 100% of the amount of tax paid for 2007
> >or some other calculation?
>
> This is not universally answerable with a simple statement, other than
> that you should pay as close to the amount you will owe for "next year"
> (i.e., 2008) as possible.
>
> The traditional "safe harbor" applies to taxes which are _withheld_ --
> and that would be to have the amount _withheld_ that is equal to 100% of
> your previous year's total tax bill.
>
> However, if you are paying only estimated taxes (rather than
> withholding), the issue is more complex -- as there are periodic payment
> benchmarks related to income realized within the various payment
> periods. The full story is covered in Pub 505 -- but it would not be
> unreasonable to suggest you will generally avoid penalties if your total
> estimated tax payments are within $1,000 of your 2008 total taxes due,
> and if your payments have been made in a timely manner throughout the
> year (i.e., by April 15, June 15, Sep 15 and Jan 15, 2009), and all four
> were roughly equal.
>
> Again, I stress this is a simplification -- intended as a general
> guideline, only.
>
> Bill
Bill: The "within $1,000 of" safe harbor is when you have
withholding only, not estimates as this poster is doing. The normal
equal and on time payments are 1/4 of last year's tax (110% of last
year if last year's AGI was over $150,000), or 1/4 of 90% of this
year's actual tax.
ed
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