Estimated Taxes

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

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

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

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:

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.

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.

Just don't pay them.

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

Seth

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, snipped-for-privacy@alum.mit.edu Arlington, MA

*** PLEASE don't copy me on replies, I'll read them in the group ***

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. ___________________________________

-----> real address on hobokeni or hobokenx

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

snipped-for-privacy@gmail.com wrote:

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.