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Hi, 16bobby. I presume you mean you have enough withheld from your pension to cover your taxes normally. If that is the case you don't have to make an estimate payment this year just because you made a profit on the market. As long as you have withheld at least as much as your prior year's taxes (112% if your prior year's AGI was over $150,000) you won't have a penalty. You might not have enough if you had stock profits and had to pay extra last year--check it out because that's the simplest thing to do. Anyway increase your withholding enough to meet that "safe harbor". Don't loan Uncle Sam, what you don't owe 'till next April.

they gave you that form because if you meet its criteria you won't have a penalty and you use it to calculate the penalty if you underpaid. If you know how, you can reverse the process and figure how much you have to pay to avoid a penalty.
You're right about trying to guess in advance, however, there's a sure-fire way to pay the least amount and that is the Annualized Income Method (Schedule AI on the 2210). It's a bear to compute so we have a Calculator at that will figure each of your installments for you as you go along, giving you credit for the withholding. Figures your taxes at the end of the year too--to check against your tax program or accountant. The demo, which runs on Excel97 or later, is free to do your first quarter and estimate your full year if you want. Already has year 2002 rates and rules, the new Teacher's Expenses and Higher Education deductions and other changes for this year. Try it.

By the way, don't try to estimate the full year and divide by 4 because if you have LTCGs from mutual funds at the end of the year you will either have overpaid by not using the Annualied Method, or underpaid because your estimate didn't include those dividends. We don't let you include the current year's estimate (until the last quarter) because of the problems it creates unless you insist. ed
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