"DF2" <replyvia[at]newsgroup_please.com> wrote:
....
- quote -

States can also be irritating various ways. Last year I
underestimated both NJ and Federal taxes by quite a bit, and
sent fairly large checks by Apr 15. A few weeks ago I got a
certified letter from NJ, wanting $45 in interest/penalty
for underpayment of estimated tax. The "certified" part
meant a trip to the post office.

The letter also said that the $45 had to be paid by
certified or cashier's check. So another trip, this time to
the bank. The bank clerk seemed a little fuddled and said
"do you want to do this? It will cost $15." I said that
that is what the state demands. She talked to her boss and
as a special favor, said they wouldn't charge me this time.

PITA. If they had just sent a simple notification that I
owed $45 I would have saved 2 trips (though lost a story).

Dennis

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rick++ wrote:

- quote -

rick++: you don't add anything to the thread but
misinformation. You don't say what the "Jan 15 estimated
payment" is, or how it would reduce his penalty. And
filing by Jan 31 just costs all the tax, instead of just the
minimum $2400. It only waives penalty on the installment
that was due on Jan 15, not the whole thing. Thise does
virtually nobody any good, and certainly not someone who can
accomplish the same thnig by paying just $2400 instead of
his entire tax due.

- quote -

The 2210 Schedule AI automatically uses the equal
installment safe harbors, so you don't have to do them
twice.. If it's the actual "Sshort Method" you are
referring to, the OP can't use that if he pays any
installment, because they wouldn't be equal.

- quote -

I think I covered all the possibiities and amounts of
penalties involved using any method and regardless of when
paid.. I did mention the AI but even if the $60,000 was
after September 1 he coud onlyi save a maximum of $45 using
the AI

ed

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Art wrote:

- quote -

I suspect that others have pointed out that withholding is
treated as if you had paid it evenly thru the year.
Estimated tax payments are not; they are treated as paid
when you pay them.

- quote -

I don't know about NY, but I know state penalties can be
much worse than federal. The federal "penalties" may be less
than what you would pay to borrow from a bank. State
penalties may exceed what it would take to borrow from a
credit card.

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >

Besides the other peoples advice, you still have at least
two chances to reduce penalties. The Jan 15 estimated
payment is one, or you can file 2006 by Jan 31. The latter
tends to be harder because many financial institutions dont
get all their paperwork to you by Jan 31.

In both cases you compute the 2210 penalty form. I suggest
doing both ways- the short equal installment- and the long
quarterly method. Then you can choose which one has the
lower penalty. The IRS computes the equal method for its
automatic penalty. The advice is to compute this as part of
the Jan 15 ES payment and send in the amount which minimizes
the penalty, if any at all.

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >

Art wrote:
- quote -

No,you are not getting conflicting answers, you are getting
alternatives along with the consequences of them. Reread my
explicit post. Yes you can send the IRS a check. Us form
1040ES voucher. Whatever amount it will reduce the penalty
by 8% simple interest, per my post

MF

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >

ed wrote:
- quote -

Thanks guys for your help. So, I seem to be getting
conflicting answers as to whether I can send a check to the
IRS now or not instead of increasing my withholding. So, can
I send a check to the IRS now even if I havent made any
payments until now? If so, what form would I use? Also, do
states have an underpayment penalty to? specfically NY
state?

Thanks again
Art

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >

- quote -

Typo: Make that Form 2210

__
Art Kamlet ArtKamlet [at] AOL.com 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 (2006) - All rights reserved. > << ================================================== ===== >

Art wrote:

- quote -

Your penalty, if you are $2,400 underpaid, and doon't do
anything about it, will be about 5.5% of the $2,400, or
about $130 if you pay the remainder by April 2007. You
can stop this penalty entirely by increasing your total
withholding to match last year's tax. You can spread it
over the remainder of time, or take it out in one or more
"one-time" extra withholdings.

Or, if you pay an installment of $1,800 now and the
remaining $600 on January 15, your total penalty will be
about $45.

If your first and second quarters' income were less this
year than last year you might save even that $45 by filing
form 2210 and its Schedule A, but it probaby isn't worhth
the effort to reconstruct your income by quarters.

The way this works is that it's presumed your underpayment
was spread equally over the 4 quarters, so you underpaid
$600 in each quarter. The interest penalty is simple
interest of 8% on the underpaid amount. So you currently
(Oct 15) owe 6 months of interest on the installment due
April 15, 2006, 4 months on the $600 due June 15, and 1
month on the $600 due Sept 15.

That's 11/12 X .08 X 600 = $44. If you don't pay that
$1,800 until April 15 you'll owe an additional 8% for 6
months, or .08 X 6/12 X $1,800 = $72. You owe the last $600
on Jan 15 and if you don't pay that until April 15 you'll
owe another 600 X .08 X 3/12 = $12 . $44 + $72 + $12 =
$128 if you don't do anything.

All of this is from IRS form 2210. Get year 2005 form 2210
and everything is the same except that the interest rates
are higher this year than in 2004.

NEXT YEAR because paying 110% of year 2006 tax is
considerably more than you'll probably owe for 2007, you
should use form 2210 Schedule AI to figure the least you
need to pay each quarter instead of basing it on last year's
tax. However, if you want to just guess at it, presume your
withholding is sufficient to cover your current tax on
salaries. Then if you have an unusual long term capital
gain, you'll owe 15% of it, or if you get more interest you
'll owe whatever your tax backet is times the amount of the
interest. You can pay the additional tax at the end of the
quarter it was incurred or get a 2210 calculator which will
tell you how much of this is required each quarter.

MF

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >

"Art" <usenet[at]pilotyid.com> wrote:

- quote -

Correct on all fronts.

- quote -

The easiest way would be to get your 2006 withholding up to
the $22,431 amount. At this point you cannot just write a
check since the first nonwithholding payment would have been
due April 2006.

- quote -

See Form 2106

--
Phil Marti
Clarksburg, MD

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I think I will have an underpayment penalty this year unless
I do something, but was wondering if someone can clarify
some points for me. Here is my situation:
- Filing married jointly
- My AGI (line 37) last year was less than 150K.
- Our total withheld last year was $18,604, but total tax
(line 63) was $22,431 since we also had some self-employed
income that I did not pay any tax on durng the year, so owed
some tax at the end of the year
- I cashed in a large amount of US savings bonds this year,
with about $60,000 in interest paid to me for them
- So, this year my AGI will be over 150K since it includes
the 60K of interest, and my tax will be a lot higher than
last year since this is an extra 60K that I didnt have last
year
- If my wife and I keep withholding as it is now, we will
not match last years total tax, probably be a few thousand
under, about $20,000

So, from what I understand, since i was under 150K last
year, I have to have paid at least my total tax by the end
of this year for me to avoid the penalty, but since I will
not have witheld 22,431 by the end of the year I will owe
some penalty.
- Is this correct? Will I owe a penalty? Did I miss
anything? Do you need more info from me?
- How can I avoid this? Do I have to adjust withholding? or
can I simply send a check to the IRS to make sure I reach
22,431 by the end of the year?
- If I dont do anything, what would my penalty be? How is it
calculated by the IRS?

Thanks in advance for all of your help,
Art

<< ================================================== ===== > << 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 (2006) - All rights reserved. > << ================================================== ===== >