Hi Fools,

I'd reaped captial gains in 98 for which I paid taxes this year. When calculating my taxes TurboTax recommended that I pay taxes in 4 quarters since my withholding was not enough and I ended up paying some taxes. At that time I thought that this year I'll not sell any stock and hence I donot have to pay those quarterly payments.

But I did sell stock this year when the market was at peak and am buying my first home. This was unanticipated and now I face paying penalty for almost 15K in gains (all short term btw nto CSCO stock, that is for long term). I know I can increase my withholding from now to end of year to reduce the tax burden and avoid the penalties. On top of things I now have learned that I will get a hefty bonus and salary hike. How do I deal with this situation to avoid the penalty?
Is there something I am missing?

Any other ideas you can recommend?

Regards
Nikhil Bhat
Cisco Systems Inc.

Congrats of Making $ on the stock. Now let's look at
the "Computer Program" that suggested quarterly
payments. It is a standard note in tax programes, an
"alert", if you will, when you have to pay. Take the good old bull by the horns and project your total 1999 income and your tax! Do it NOW. Remember, you paid more tax in tax year 1998 - is witholding the same ? Will your tax for 1999 be more? What will your home ownership do to help your tax bill? Mortgage interest , real estate taxes, personal property taxes are deductible, as well as any points you paid for loan origination although there's not too much of that going on - this month. Best get thee to your tax preparer or your computer tax program and see what it looks like ahead of time.
BobStL

Sorry, forgot about the "bonus" - if you can control
the with-holding on that it could put you in the driver's seat. It's really too late in the year for quarterly payments. Try to make your with-holding
equal 100% of your 1998 tax liability.
BobStL

But I did sell stock this year when the market was at peak and am buying my first home. This was unanticipated and now I face paying penalty for almost 15K in gains (all short term btw nto CSCO stock, that is for long term). I know I can increase my withholding from now to end of year to reduce the tax burden and avoid the penalties. On top of things I now have learned that I will get a hefty bonus and salary hike. How do I deal with this situation to avoid the penalty?
Is there something I am missing
=======================
Without knowing all of the facts pertaining to your return I would suggest you look at your prior year return and make sure you have withheld from your salary amounts at least equal to your prior year TOTAL TAX as shown on your 1040.

As long as you do so and your prior year taxable income was less than 150k you should be able to avoid any estimated tax penalty.

pete

This was unanticipated and
now I face paying penalty for almost 15K in gains (all short
term btw nto CSCO stock, that is for long term). I know I can increase my withholding from now to end of year to reduce the tax burden and avoid the penalties. On top of things I nown have learned that I will get a hefty bonus and salary hike. How do I deal with this situation to avoid the penalty? Is there something I am missing?
You have several options, but you didn't give me all the facts. Pick the one you like.
1.Increase total withholding to equal last years taxes (or 105% if your AGI last year was over $150,000, or if you file MFS in 1999, $75,000).
2. Increase withholding to equal 90% of 1999 taxes, or within $1,000 of them. (I doubt if you can do this with any accuracy, even with a tax estimator, but you can use our free demo for this at edcosoft.com)
3. OR, Get a 2210 tax calculator and/or figure out the Annualized Income Method and pay the required current installment. Quicken can't do this until you do your 1999 taxes, nor can " tax estimators".
4. Pay the penalty. It's only 8% simple interest. Ed


Any other ideas you can recommend?

Regards
Nikhil Bhat
Cisco Systems Inc.

Increase your withholding so that by the end of the year the withholding is 105% of your 1998 tax liability. In other words if your tax was 10,000 in 1998,
your withholding this year should be at least $10,500. In this way you will owe no penalties no matter how much your tax liability will be in 1999. Note that you will still have to pay taxes by April 15, 2000. This could be a big payment, but there will be no penalty.

Thank You all for your informative replies. I will go back at look at my 98 and 99 tax situation and figure withholding accordingly.

Thanks again!!

Regards
Nikhil Bhat
Cisco Systems Inc.