Mike Wellman <irsfi...[at]aol.com> wrote:

- quote -

You are right: I did not say or imply anything of the sort.
It is a fallacy of exaggeration that is all yours.

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joeu2004 <joeu2...[at]hotmail.com> wrote:
- quote -

With all due respect, to use an extreme example, say you
made $1,000,000 in 2006 and based on that, the software
calculates that you need to make estimated tax payments for
2007 of $350,000. However, in 2007, you estimate that your
income will only be $25,000. Are you saying he still needs
to make estimated payments of $350,000? Of course not. You
make adjustments to your withholding based on current
circumstances. You are not required to make the government
interest free loans.

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Mike Wellman <irsfi...[at]aol.com> wrote:

- quote -

I believe that is incorrect, if by that, you mean that you
can escape underpayment penalty when you make insufficient
timely tax payments throughout the year. From the 1040
instructions for line 77 (2006): "You may owe this penalty
if ... [y]ou did not pay enough estimated tax by any of the
due dates. This is true even if you are due a refund".

I presume you did not mean the absurd interpretation that no
one "has to" pay taxes, much less estimated taxes. That is
like saying: "no one 'has to' stop at stop signs or red
lights". The statement is true. But a person will suffer
the consequences, if they do not abide by the law.

The tax law requires that we pay estimated taxes in a timely
manner through the year or suffer the consequences
(penalty), whether or not we expect a refund.

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francesl...[at]gmail.com wrote:

- quote -

Sure, if you have (sufficient) wage income or other income
subject to potential withholding.

In that case, you might be able to adjust your withholding
to cover your expected tax liability or at least the minimum
required by the so-called "safe harbor" rules. Those rules
can be tricky. Refer to IRS 505 and Form 1040-ES for
details.

Several responses said, in effect, you never "have to" pay
estimated taxes. That's like saying "you never 'have to'
stop at stop signs and red lights". The statement is true;
but I think it is an absurd interpretation of the question.
If you don't follow the law, you suffer the consequences.
I'm sure your question was: "can I avoid paying estimated
taxes without penalty?".

Generally, the tax law requires that you pay taxes in a
timely manner throughout the year, whether or not you expect
a refund. If you don't, you will suffer the consequences
(penalty). See the "must" language in IRS Pub 505.

But there are two ways to pay those taxes: withholding and
estimated tax payments.

The advantage of withholding is that the IRS presumes that
it is paid evenly throughout the year, even if it was not.
(You have the option of stating otherwise, if it is to your
advantage.) So if you have sufficient income subject to
withholding, you may be able to compensate for paying too
little tax earlier in the year, be it by withholding or
estimated tax payments, simply increasing your withholding
later in the year.

That is not true if you make estimated tax payments.
Although you can compensate by increasing your later
estimated tax payments -- and that will reduce the penalty
-- you might still incur a penalty if the (complex)
underpayment computation indicates that you did not pay
sufficient tax earlier in the year.

Again, what is "sufficient" is complex -- so complex that
the IRS (and the Calif FTB) offer to compute the penalty for
you, without interest if you remit the penalty within 15
days of notification. But if you are curious, see Form
2210.

PS: Some responses blame your tax software for misleading
you by saying that you "must" make estimated tax payments.
Actually, I think that mimicks the IRS language. As I
recall, if you incur an underpayment penalty in one year, I
believe the IRS will send you estimated tax payment vouchers
for the next year with a letter that states you "must" make
estimated tax payments. (As I recall, that letter fails to
state the conditions under which you do not make estimated
tax payments. But I could be wrong, or the language of the
letter may have changed in recent years.)

You can even ignore the IRS's "must" language, as long as
you know you will cover your "timely tax payment"
requirement through withholding. I do agree that the "must"
language is misleading, unless it is properly qualified as
it is in IRS Pub 505.

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<francesllee[at]gmail.com> wrote:

- quote -

You should prepare a projection for 2007

Once you've determined your projected tax liability, see if
your withholding will cover the liability. If not, then you
need to pay estimated taxes quarterly.

The software genereally generates estimates for 2007 based
on the 2006 facts. If there is going to be a difference in
2007, adjustments need to be made.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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francesl...[at]gmail.com wrote:

- quote -

Who is the "it" that said that? Probbly TT, who is wrong.
The paying of Estimated taxes is voluntary with an 8% simple
interest penalty if you underpay. No penalty nor fines,
just interest. If you know your withholding is ample,
throw the 1040ES forms away.

ed

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francesllee[at]gmail.com wrote:

- quote -

You only have to pay estimated taxes if you would owe too
much (there are also some "safe harbor" rules that allow you
to avoid paying underwithholdig penalties). If you're going
to get a refund, you don't need to pay estimated taxes.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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<francesllee[at]gmail.com> wrote:

- quote -

Just don't pay them.

If you aren't underwithheld, there won't be a penalty.

Seth

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francesl...[at]gmail.com wrote:

- quote -

You do not need to pay estimated taxes if you think you are
getting a refund. I would caution you to estimate your taxes
taking into account the changes to your circumstances to be
sure. Depending on the ssize of your mortgage and when you
purchased your house, it may not help enough for 2007. Just
be careful.

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francesl...[at]gmail.com wrote:

- quote -

Sure, just don't send in any money. If you owe next year,
there may be penalties. Otherwise, there aren't any problems
if you have withholding to cover your tax liability.

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What you are trying to do is avoid paying the penalty.
So you can compute the penalty form 2210 to see if you
fall in the penalty phase. You have to compute taxes
for March 31, May 31, Aug 30 and Dec 31 with the
penalty starting 15 days later.

The federal tax credit for hybrids phases out after
60,000 of a model has been sold. Prius was the first
hit this amount in May 2006. I think there may be
a $787 credit up to March 31, 2007 if I read this
article correctly:

http://www.consumeraffairs.com/news0...ax_credit.html

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<francesllee[at]gmail.com> wrote:

- quote -

I assume the "it" in question is tax software that produced
estimated tax vouchers for 2007.

- quote -

Yes. Just don't pay it. The fact that software, which
knows nothing about your different situation for 2007 and
bases its output on only what you tell it, thinks you should
doesn't mean you have to. For the rules see IRS Publication
505.

--
Phil Marti
Clarksburg, MD

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francesl...[at]gmail.com wrote:

- quote -

No one *has to* pay estimates. It is voluntary, but if you
don't pay in enough there is a simple interest penalty on
the underpayment. If you pay in at least the amount of last
year's tax, or 90% of this year's tax, whichever is less, in
4 equal and on time payments, you will not incur a penalty.
Get IRS form 2210 and see how the penalty works.

ed

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For my 1040 for 2006, it said I had to pay federal estimated
taxes for 2007. I know that for 2007 I will most likely be
getting a refund because I bought a prius and a new house.
Is there a way to get around paying federal estimated taxes?

<< ------------------------------------------------------- > << 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. > << ------------------------------------------------------- >