TTax question

Just a couple of thoughts - there really is not enough information to answer why without going into your personal finances.

1) I don't pay estimated taxes as I am an employee.

Estimated taxes does not have anything to do with employment. It is used to deposit funds to cover your potential taxes. This is one way you can cover your taxes for non-employment income (i.e. investments).

2) I had to pay a $42 penalty for underpayment of taxes for 2007...

It basically looks at your taxes withheld and estimated at four points during the year and compares income to that point. While your total taxes might have changed only by a few hundred dollars over the course of the year - you likely had a spike in your income at some point.

3) I wonder why I couldn't apply this *rebate* to my taxes that I have to pay?

This was the way the law was written. As your elected officials.

Do you have investments generating unearned income? Are you under withholding on your paychecks? Both of these will trigger owing taxes at year end. TT is probably designed to calculate estimated tax payments if you owe money with your return. You might need to submit a new w-4 to your employers if either is causing you to owe taxes.

speedlever wrote in news:Xns9A5F561F956C1speedleveryahoocom@66.250.146.128:

Looks like you answered your own question. You didn't have enough withheld in 2007, and TTax is trying to help you in 2008 by offering the option to make estimated payments to make up your shortfall. If you have a penalty from 2007 form 2210, you should go to the estimated tax interview/worksheet in TTax. The info here is of the "garbage in/garbage out" variety. TTax makes some assumptions about your 2008 income and witholding/estimated payments that you need to go through and update based on your best estimates. There are various "safe harbor" methods of witholding and estimating to avoid the penalty (such as paying 100% or 110% of 2007 tax liability in 2008). The program will provide defaults but you need to do "what if" drills to see what method works best (of course, you could always put in a W-4 to increase your witholding).

I've found that if your situation is at all complicated (varying income in particular) that TTax estimated tax worksheets are insufficient. I use a spreadsheet program from an outfit called edcosoft (NFI).

scott s. .

[snip]

Others have answered your other questions, but this one is one I have wondered about too. Seems like they could save on a lot of printing/postage costs by not having to send out those rebate checks?

Thanks for all the good info.

Our family income has had a lot of variance in the last few years (mostly up) for various reasons, so it has been somewhat difficult to fine-tune the W-4's for accurate withholding.

I guess I had the idea in mind that estimated taxes were typically paid by those self-employed or with irregular types of income.

You have multiple employers and each is withholding taxes using tax tables based on their individual payments to you. However your taxes are calculated on your total income. As tax rates rise as income increases you are seeing the mismatch due to increasing marginal rates on income. Simple example assume the tax rate is 10% on the first $10,000 and 20% on all other income. Say each employer pays you $10,000 (each) and withholds $1000 (each). your total income is $40,000 and your tax due is $1,0000 times 10% and $30,000 times 20% or a total of $7,000. Thus you still owe $3,000 ($7,000 - $4,000). Only you (and the IRS) know you have multiple sources of income, unless you tell the employer by changing your W-4. You can adjust one or more of your W-4s to reduce dependents.

Thanks Howard. That makes sense.

I don't expect to have the multiple employer issue this year, but will have some deferred compensation from last year due from my current employer that will be paid this year. And with performance bonuses, it becomes difficult to know how to predict income (and tax withholding requirements).

Howard wrote in news: snipped-for-privacy@s50g2000hsb.googlegroups.com:

snip

If I'm not mistaken, quarterly estimated tax payments are mainly and fundamentally a self-withholding. Uncle Sam doesn't like us owing him money until next April 15.

Yes, if you are self-employed you have no salary withheld so you pay quarterly. But if you've got a regular job and have under withheld in the past so severely that a penalty has kicked in, he'd like you to pay quarterly, also.

Doug

speedlever wrote:

Thanks Doug. For the record, my tax due (including $42 penalty) is $2750. Which is a fair amount of money in my view, although probably pocket change for many who owe taxes. Uncle Sam wanted an additional $1149 per quarter, which seems a bit excessive to me.

Doug wrote in news:h60Dj.8727$2Y4.4348@trndny01: