On Jun 13, 2:35*pm, derk...[at]gmail.com wrote:
- quote -

derk: Now that you know what wer're trying to do download a 2210 tax
calculater from the web which will remove the PITA factor and save you
some bucks.

ed

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

Very handy set of rules Ed, there is some logic to this after all :-)

Slightly off-topic: I had trouble understanding the logic of the word
"annualizing". Since I did my from 2210 for 2007 after the fact,
in an attempt to get rid of underpayment penalties, I felt like I was
"quarterizing" my income rather that "annualizing" it.. However,
after looking up the definition of the word it made some more sense.

Annualizing: Making calculations for a period of less than a year as
if
the period were a whole year. For example, if data existed for only
one quarter, it could be annualized by multiplying by four.

So the word is used in the sense that I should do this during the
year,
and in each quarter/period annualize from data known up to the current
time.

For example, I should use form 2210 on March 31 to determine a safe
(penalty-wise) amount of estimated tax to pay`, I would annualize
(predict the full year)
from Q1 and then determine total/4 as the safe amount (modulo some
<1.0 fudge factors that IRS
allows you just to be nice). At Q2 end (05/31, weird Q2 that IRS
uses), I would annualize based on
the 5month Q1+Q2 knowledge of data, again predict the full year by
multiplying by 2.4=12/5
and pay enough tax to ensure I paid enough of the total fir the first
two quarters. At Q3,(08/31,
weird again) the multiplier is 12/8 -1.5 and in Q4 it is 12/12=1.0,

It all makes sense now. The people that wrote the rules realize that
people that have
uneven income cannot reliably know what the total is going to be, and
they are willing
to give you some leeway. It;s all good, but complicated to understand
for non-experts,
and a PITA to calculate.

Pardon me for spelling out what all you experts already know and
understand, but perhaps
it will be useful for another newbie like myself.

--
<< ------------------------------------------------------- > << 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 Jun 12, 4:15*pm, "removeps-gro...[at]yahoo.com" <removeps-
gro...[at]yahoo.com> wrote:
- quote -

A few other tips to minimize initial quarters' installments whether
calculating currently, or to reduce a penalty, and some tips to keep
you out trouble with the IRS.

Make any deduction on 1040 lines 23 through line 35 as early as
possible

Apply carry-over losses in the first quarter, and apply any limit at
the incurred level befor annulizing,

Make any itimized deductions on Schedule A each quarter, including
State Sale Tax (if reinstated) and Property Tax, even if you do not
intend to itemize annually.

Take any Schedule C, D, E and F losses available as soon as possible.
Their annulized effect is a 4-fold reduction in the first quarter.

Determine which dividends are Qualified Dividends and figure each
quarters' annualized tax using an appropriate Schedule D worksheet.

DO NOT take any pension, RMD, IRA or taxable payouts before September
1.

Calculate and include any credits in the earliest quarter you are
entitled to them, particularly the Child Tax Credit.

Calculate AMT, phase-outs and credit limitations every quarter so you
don't underpay any quarter.

Compute taxability of your Social Security income each quarter

Apply withholding to the quarter it is withheld . Don't use averaged
withholding until year-end.

Include withholding (to reduce installments) through the 15th of the
month following the quarter end.

Be sure to figure SE Tax, deduct 1/2 of it at 1040 line 27 and SE
Health Insurance at line 29.

Download a 2210 tax calculator from the web to do all the calucations
for you, and keep you legal

Calculate any RMD early and prepare to take the RMD in December and
withhold up to the entire amount. Reduce any calculated quarterly
installments by 1/4 of the expcted RMD. Check with you RMD
administrator as to lead times, required forms, limitations etc. I
phone TRPrice and verbally advise them of the current RMD and the
amount to withhold. They have no limits or special requirements.

Have fun.

ed

--
<< ------------------------------------------------------- > << 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 <KTc4k.4094$LL4.750[at]bignews7.bellsouth.net> ,
Paul Thomas, CPA <paulthomascpapc[at]bellsouth.net> wrote:
- quote -

His tax liability for the first quarter is $0 only by using up his
entire capital loss carryforward. And note that he's using the
long-term loss against a short-term gain (because that's all he has,
it's allowed), though by the end of the year the long-term loss gets
applied against a (later quarter) long-term gain.

He did have income in the first quarter: $200,000 in capital gains.

Seth

--
<< ------------------------------------------------------- > << 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 Jun 12, 11:16*am, Mark Bole <ma...[at]pacbell.net> wrote:

- quote -

No broker I've seen is willing to do this.


- quote -

It might be a good idea to make the charitable contributions that
people typically make in December in the first quarter (Jan 1 to April
15) in order to lower the first quarter annualized taxable income --
ie. if you intend to donate 15k, if you do it in the first quarter it
will be like donating 60k for the whole year. Sounds right?

--
<< ------------------------------------------------------- > << 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 Jun 12, 1:16*pm, Mark Bole <ma...[at]pacbell.net> wrote:
- quote -

Mark: You are right. The carryovers are put in the first quarter
and limited to a net loss of $3,000 , which gets annualized to
$12,000, which is one of the advantages to the AI Method. If they are
not offset in the first quarter thay are applied to any gains as they
occur in any subsequent quarter and the excess (up to $3,000) carried
forward though all quarters.. Credits are applied in whatever amount
is allowable for the annualized taxes through each quarter. So they
may be fully earned in the first quarter (typical for the Child Tax
Credit). or partially earned in the first quarter and then fully
earned in the second, third and fourth quarter.

In the OP's case they are fully offset with gains in the first
quarter so there is no further carryforward.

ed

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

Paul Thomas, CPA wrote:
- quote -

[...]
- quote -

The rules are complicated, but typically safe harbor depends on
withholding or *equal* quarterly payments.

- quote -

No. As mentioned by others, by doing mini-tax returns (via form 2210)
for each IRS "quarter", he can pay what he needs to each quarter to
avoid both penalty and overpayment.

If his capital gain sale is reported on a 1099-B, he could ask the
broker to do withholding, which by default counts for the whole year no
matter when it actually happens.

He could also make (over-)estimated state tax payments close to but
before the end of the year to help smooth out some of the unevenness,
although under the annualized method they will only count for the
quarter in which they were actually made.

You might be asking, how are the capital loss carryovers allocated under
the annualized method? I couldn't find a simple answer in the
instructions for Form 2210 or Pub 505, but I suspect if you fill out the
worksheets and forms, they get applied to the capital gain income as it
occurs. Some credits, on the other hand, need to be allocated across
quarters according to your proportional AGI for that quarter.

-Mark Bole

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

"Seth" <sethb[at]panix.com> wrote
- quote -



His tax liability for the first quarter was $0, and that's what he paid. So
there's not any underpayment.

He'll want to be absolutely sure he does not end up underpaid for the year,
and he'll want to be sure to file the Annualized Income page of the 2210 to
let the IRS know he had no income in that first quarter. Remember though,
that the IRS version of a quarter of a year isn't the same as yours or mine.







- quote -




Safe harbor is never gone. Some of the bars may be higher, that's all.





--
Paul A. Thomas, CPA
Athens, Georgia
770-725-1433 Office

--
<< ------------------------------------------------------- > << 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 Jun 12, 10:49*am, se...[at]panix.com (Seth) wrote:
- quote -

Using the AI Method he has no tx liability for earlier quarters with
no taxable income, regardless of what happens in later quarters. If
he has income in later quarters he will owe an installment for that
quarter. Get IRS form 2210 and fill it in and see how this works.
Or download a form 2210 tax calculator from the web that will do all
the messy computations for you.

ed

--
<< ------------------------------------------------------- > << 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 <QG_3k.3046$3F5.1499[at]bignews2.bellsouth.net> ,
Paul Thomas <paulthomascpa[at]bellsouth.net> wrote:
- quote -

So what happens if he has a lot more income later in the year,
including $100,000 of long-term capital gains (and, say, $500,000
consulting fees)? Would he have underpaid for the first quarter?

- quote -

Assume his tax liability last year was very high (so that safe harbor
is gone).

Seth

--
<< ------------------------------------------------------- > << 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 Jun 11, 7:42*pm, se...[at]panix.com (Seth) wrote:
- quote -

He owes no tax for the quarter so needn't pay ANY installment. Should
he get income in later quarters he can pay an installment for the
later quarter based on the Annualized Income Method for determining
underpayments. If he did have other income later any installment
indicated by the AI Method would be limited to the amount of last
year's tax for the same number of quarters to date. By using the AI
Method he will incur no underpayment penalties.

For instance, if he should have income in the third quarter and the
cumulative annualized tax due (third installment with no payment in
the first or second quarter) is $1,500 and his taxes last year were
$400, and he paid no earlier installments becasue he had no earlier
income, the AI computations would indicate $300 due on Sept 15 ( 3/4
of $400) , and regardless of the amount of any additional income later
in the year, another payment of $300 on Jan 15 would be indicated for
no penalties under the AI Method.

ed

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

"Seth" <sethb[at]panix.com> wrote
- quote -




None based on those only facts.



- quote -



What was his tax liability ~last~ year?

That amount determines if he can meet or exceed one or more of the
safe-harbor rules.






--
Paul A. Thomas, CPA
Athens, Georgia

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

Taxpayer has $100,000 short-term capital loss carryforward, and
$100,000 long-term capital loss carryforward. In the first quarter,
he gets $200,000 in short-term capital gains. How much estimated tax
should he pay? (Assume no other income in that quarter.)

If that's his only income for the year, his tax bill will be $0. But
if he doesn't pay any estimated tax, and does have more income later
in the year, he'll be underpaid and subject to a penalty. Is he
really stuck between either potentially overpaying or potentially
paying a penalty?

Seth

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