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Author: makfan Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6725  
Subject: Re: CG taxes & tracking portfolio performance Date: 1/19/2000 7:18 PM
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At the risk of sounding uninformed, in what cases are estimated tax payments required?

Ah, now there's a simple-sounding question that can be deceptively complex. The following federal tax information comes from Pub 505 at http://www.irs.gov/forms_pubs/pubs/p5050201.htm

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If you had a tax liability for 1999, you may have to pay estimated tax for 2000.

General rule. You must make estimated tax payments for 2000 if you expect to owe at least $1,000 in tax for 2000, after subtracting your withholding and credits, and you expect your withholding and credits to be less than the smaller of:

90% of the tax to be shown on your 2000 tax return, or
100% of the tax shown on your 1999 tax return. Your 1999 tax return must cover all 12 months.
Exceptions. There are exceptions to the general rule for farmers, fishermen, and certain higher income taxpayers.

Farmers and fishermen. If at least two-thirds of your gross income for 1999 or 2000 is from farming or fishing, substitute 66 2/3% for 90% in (1) above.

For definitions of gross income from farming and gross income from fishing, see Farmers and Fishermen later under When To Pay Estimated Tax.

Higher income taxpayers. If less than two-thirds of your gross income for 1999 and 2000 is from farming or fishing and your adjusted gross income (AGI) for 1999 was more than $150,000 ($75,000 if your filing status for 2000 is married filing a separate return), substitute 108.6% for 100% in (2) above.

For 1999, AGI is the amount shown on Form 1040 - line 33; Form 1040A - line 18; and Form 1040EZ - line 4.

Note. If all your 2000 income will be subject to income tax withholding, you probably do not need to make estimated tax payments.

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NOTE: The IRS will not lock you up if you don't make estimated tax payments. It is perfectly legal to choose not to make estimated tax payments and instead pay the entire tax balance with your return. However, if you do not meet the exemptions from estimated tax payments, you will pay a penalty based on the number of days that the tax is late.

Hope this helps.

Mike

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