rick++ wrote:

- quote -

The Anualized Income Method automatically computes the lower
of either safe harbor or annualized for each instllment.
Your generallity is usually correct, but a Capital Loss
Carryover (or capital losses incurred in the first quarter)
can often make the AI method attractive, as can even paying
your property taxes in January. In other words, you resllay
need to factor everything into the Schedule AI to maximize
it.

Also, when computing the AI Method for the current year, DO
NOT estimate current year's income. Use ONLY actual income
for each quarter as earned. The logic of this is that if
you estimate too low you'll create a penalty you can't
overcome and if you estimate too high the estimate is lost
to the lower actual amount of installment required. Just
don't estimate.

ed

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Compute your taxes three ways - annualized estimated income
for 2006, annualized and equal installment for 2007. Then
you can choose which way requires the slowest payment of
taxes. ICompute this ASAP. In general equal installment,
favors early year income and annualized late year income.

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Ted wrote:
- quote -

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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"ed" <edcosoft[at]sbcglobal.net> wrote:
- quote -

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?

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- quote -

No, taxpayer will have to pay the tax by January 15, 2007 to
definitely avoid an underpayment penalty.

Steve

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Ted wrote:

- quote -

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).

ed

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"Ted" <Ted666[at]yahoo.com> wrote
- quote -

If you're looking at a huge gain, and you can time in for
December or January, consider your income this year, as well
as next, before this extra gain is factored in. Also consider
what you are going to do with that money. The higher income
reduces itemized deduction amounts, so consider that as well
in your timing.

If you time the gain for January 2007, make sure you meet the
safe harbor for estimated for 2006 taxes, bank the rest in a
CD or something so it's available in 2008 when the bulk of
the taxes will be due.

Regardless, make smart decisions about what you do with that
gain money.

--
Paul A. Thomas, CPA
Athens, Georgia

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"Ted" <Ted666[at]yahoo.com> wrote:

- quote -

If your timely equal 2007 estimated tax payments plus
withholding are at least as much as 110% (maybe less) than
your 2006 total tax you can hold onto the rest of it until
4/15/2008. See IRS Publication 505.

--
Phil Marti
Clarksburg, MD

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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.

<< ================================================== ===== > << 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. > << ================================================== ===== >