<removeps-groups[at]yahoo.com> wrote:

- quote -

Correct. Notice then that line 7 is the $1,000 balance due test. This is
the "balance due less than $1,000" safe harbor, which considers only
withholding.

- quote -

How do you reach that conclusion? You haven't even figured penalty yet.
All you know at this point is that there was a required payment. There's no
conlusion yet drawn whether the safe harbor was met.

- quote -

To quote our esteemed Vice President, "So?" How does that differ from what
I said: "Timely equal ES payments are included in determining whether the
prior-year safe harbor is met"?

My software then goes on to complete Part IV, where the zero penalty is
computed since all required installments were timely paid.

Finally, going back to line 9, we find that when the prior year safe harbor
is met through timely equal ES payments you don't have to file a 2210.
That's because IRS already knows about them.

- quote -

And we all know that brokerages, just like banks, exist only to satisfy
their customers.

All kidding aside, it goes back to that famous word that has three double
letters in a row: bookkeeping. It's a major hassle, and that's one reason
they don't want to do it. Even worse for a brokerage. What if there's no
cash in your account? Where are they going to come up with the cash to pay
the withholding? Banks especially want to hang onto your money rather than
paying it over to Uncle Sugar through withholding. After all, most people
don't withdraw from their interest-bearing accounts to pay the tax due on
those accounts' earnings. They come up with the money somewhere else.

I have some special historical insight into this since I was one of many
involved with implementing backup withholding at IRS. No matter how much
gin I apply to my brain cells, I haven't yet been able to blot out the
memory. Actually, my efforts have been partially successful. I can't be
100% sure that dividends were included in the legislative proposal story
that follows, but I know interest was.

TCMP (anyone remember TCMP?) had shown that there was abysmal reporting of
interest and dividend income on returns. Automated underreporter was but a
glimmer in its daddy's eye, and IRS proposed withholding on interest and
dividends as a legislative change. Bob Dole (R-KS), then chairman of Senate
Finance, liked it. Financial service providers hated it and went to DEFCON
5 with their lobbyists, a/k/a campaign cash spigots.

They managed to kill automatic withholding. But we Kansans can get nasty
when you rile us. Thus was born backup withholding, and more than one rumor
had Bob Dole saying, "That'll make 'em wish they had universal withholding."

--
Phil Marti
Clarksburg, MD

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

On Mar 29, 8:24 am, "Phil Marti" <prm20...[at]verizon.net> wrote:

- quote -

But line 6 on part I of form 2210 says "6. Withholding taxes. Do not
include estimated payments", with "Do not" in bold. I created a
scenario in my tax program: single filer with 200k income.

Scenario 1: no estimated tax paid
line7=200000 (wages)
line43=192066 (taxable income)
tax=49450 (tax)
line64=0 (tax withheld)
line65=0 (estimated tax)
line77=2521 (penalty)

Scenario 2: estimated of 60k paid (15k each quarter)
line64=60000 (estimated tax, each quarter)
line77=0 (penalty)

Form 2210 in Scenario 2 is:
Part 1.line1=49450 (tax due)
Part 1.line5=44505 (90% of tax due)
Part 1.line6=0 (withholding taxes, no estimated)
Part 1.line8=10000 (tax due based on prior year)
Part 1.line9=44505 (required annual payment)
Part 1.line9=Yes (you may owe a penalty, but do not file unless a
checkbox is checked)

Part 2.checkboxes = none

As you can see estimated tax payments are not used in determining if
the prior year safe harbor is met.

Part 3.line10=44505 (required annual payment)
Part 3.line12=60000 (estimated tax)
Part 3.line14=0 (total underpayment)
Part 3.line17=0 (penalty)

So the penalty still turns to be zero, so it's as if the estimated tax
was used in determining prior year safe harbor.


- quote -

Why don't they want to? Customers like it as it may help them meet
the safe habor.

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

In article <siegman-D40777.12480429032008[at]nntp.stanford.edu> ,
AES <siegman[at]stanford.edu> wrote:

- quote -

Safe harbor saves you from a penalty for being underwithheld. It has
nothing to do with the April 15 deadline for paying the rest of what you
owe. Filing an extension doesn't change this, either. You're always
required to pay by April 15, the extension just allows you to send the
paperwork (the tax return) later.

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

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

How does "safe harbor" relate to extensions on filing?

That is, suppose I have unexpected or unplanned income -- maybe lots of
it -- but I've fully satisfied the safe harbor requirements, whatever
they may be, based on my last year's return.

Am I then fully safe as regards this year's return, even if I request a
6 month extension?

Or am I only safe provided that I file this year's return by April 15 --
or at least pay the full amount needed to cover this year's return by
April 15?

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

<removeps-groups[at]yahoo.com> wrote:

- quote -

Sorry, but you're wrong. Timely equal ES payments are included in
determining whether the prior-year safe harbor is met. Aside from the fact
that I've used this one many times, it's covered in Pub 505. Perhaps you're
thinking of the $1,000 balance due safe harbor, which considers only
withholding.

- quote -

Stop filing and paying long enough and you'll learn that your brokerage can
withhold. They are not required, nor do they want, to voluntarily withhold.

There are basically two categories of backup withholding: "no TIN" and
"noncompliance." (Withholding from gambling winnings isn't necessarily
backup withholding. It's more like wage withholding, but with different
rules.)

If a covered payor doesn't get a TIN from the payee, they must backup
withhold. The onus here is on the payor.

Noncompliance backup withholding is initiated by the IRS. I don't recall
all the criteria and notice stream, but it basically boils down to the payee
isn't in full compliance (reporting and paying), IRS tells the payor to
backup withhold, and it's a somewhat complicated process to get the backup
withholding order revoked.

--
Phil Marti
Clarksburg, MD

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

On Mar 28, 6:38 pm, Barry Margolin <bar...[at]alum.mit.edu> wrote:

- quote -

Last sentence is correct, but not "If your payments during the year
(withholdings + estimated taxes) are at least the previous year's
liability, there's no penalty for underpayment". First, it includes
only your withholding. Second, if your AGI is above a limit, then the
rule is 110% of the previous year's liability. And the requirements
are more lenient for farmers and fisherman.

In this case, the previous year's liability was $0, so 100% or 110% of
that is still zero.

What are the sources of backup withholding? I called my brokerage and
asked if they could withhold taxes from my dividends and capital
gains, and they said no. So the only backup withholding I know of is
W2, and gambling withholding.

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

In article <47EC56B5.5000707[at]OfIRS.com> ,
"Scared[at]OfIRS.com" <Scared[at]OfIRS.com> wrote:

- quote -

This is the "safe harbor" rule: If your payments during the year
(withholdings + estimated taxes) are at least the previous year's
liability, there's no penalty for underpayment. This means that for the
year after you had no tax liability, you don't have to make any payments
until the return is due.

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

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

Phil Marti wrote:
- quote -

Thanks for the confirmation Phil!

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

<Scared[at]OfIRS.com> wrote:

- quote -

Sorry, the fact that you had no 2006 tax liability and didn't file a return
slipped past me the first time. All you have to do is check that box in TT.
Note: IRS already knows you had no 2006 tax, so the form doesn't actually
go with the return, so don't panic when TT doesn't produce a copy to send.
See the 2210 instructions.

--
Phil Marti
Clarksburg, MD

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

Phil Marti wrote:
- quote -

In TurboTax was playing around with Form 2210 (Underpayment of Est. Tax)
and I checked "Check if you had no tax liability for 2006", and the
penalty disappeared. Does this make sense for me to do? If so, should
I still attach Schedule AI (I can do it easily with TurboTax)?


- quote -


Thanks Phil!

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

<Scared[at]OfIRS.com> wrote:

- quote -

Absent any other information, they assume equal income and deductions
throughout the year.

- quote -

The amount isn't estimated, it's calculated based on the above assumption.
Because your income was all lumped at the end of the year, you can reduce or
eliminate the penalty by completing Schedule AI of Form 2210 and attaching
it to your return.

- quote -

No. Each year stands alone.

--
Phil Marti
Clarksburg, MD

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

Due to little income I did not turn in Federal taxes
for FY 2005 & FY 2006. However due to redemption of
US Savings Bonds and selling some stock (all in 4th qtr),
I have to pay taxes.

How does the IRS deal with the fact that I didn't
pay estimated taxes? Using TurboTax it has added
a small amount for as "Estimated Tax Penalty".
Do I pay this "estimated" amount?

Also, if I don't expect to pay taxes in FY 2008,
will I need to submit estimated taxes in 2008
because of my 2007 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 (2007) - All rights reserved. > << ------------------------------------------------------- >