Federal Estimated income Taxes and penalties

must be paid before January 15, 2009?

To avoid penalty you have to pay 90% to 110% (higher income) of previous years taxes. Form 2210 tells you how much.

Sounds like your tax software calculated the 2210 penalty form the equal-quarter method. The annualized method is more favorable for late year income. But that method takes more hand-work to calculate. You need snapshots of your employment and investment income at the end of each tax quarter.

must be paid before January 15, 2009?

To avoid an "underprepayment penalty" $4,185 of your 2009 federal income tax has to be paid before January 15 of 2010. Or maybe only $3,185 if it's paid by *estimates* and not by withholding...

must be paid before January 15, 2009?

I have NO employment income I have a company pension. I have Social Security.

Was that your total tax liability, or just the balance due with your return? All the other answers about "safe harbor" are assuming that was your total tax liability.

An income tax liability in 2008 of $4,185 would correspond roughly to only $30,600 taxable income ($33,300 MFJ). Not knowing anything about your filing status or other adjustments/deductions/credits/additional taxes, it's hard to even guess.

So your AGI will quite likely be more than $150K, therefore the safe harbor is 110% of the 2008 liability, not 100%.

As a side note, s> To avoid an under payment penalty you only have to pay the amount of

Or maybe 110% of last year's tax, see above.

The underpayment of estimated tax penalty is just a percent of the amount you didn't pay during the year, last year it was about 3.5% and I imagine will be similarly low this year. (This is not an annual percentage, but for some folks still a pretty reasonable short-term loan rate).

Last but not least, don't forget to calculate for your state tax return also, they may have different rules.

-Mark Bole

coupons for quarterly payments of the estimated

If you convert 185k into a Roth in 2009, then your AGI is 185k plus whatever other income you have? Isn't the rule for 2009 that you can convert to a Roth only if your AGI is under 100k?

In 2010, there should be no limits on conversion, right? And the tax bill due to the conversion is split 50%/50% over two years.

The rule uses Modified AGI, which is AGI *without* the conversion income. Otherwise, no one would be able to convert large IRAs, unless they spread it out over many years.

Mark. The 110% of last year's tax is only required if LAST YEAR'S AGI was over $150,000, not the current year.

Because his withholding in 2009 is greater than his tax in 2008 NO payment are due until April 15, 2010, and no underpayment penalty will be due.

ed

Thanx for the correction. I was making the mistake of thinking logically, instead of the tax law.

-Mark Bole