I think the bottom line here is that the sooner you pay in estimated taxes that either equal 90% of what you expect to owe for 1999 or 100/110% of 1998 taxes, the sooner any penalties will stop running. Not true. You are exempted from paying estimated income tax only if the total amount on you tax return minus your withholding (estimated tax payment is not considered) is less than $1,000. Everybody else must make estimated tax payment. The are 3 options when making estimated tax payment:1) Make one lump-sum payment on April 15.2) Make equal installment for each of the period (Jan 1 to Mar 31, Apr 1 to May 31, Jun 1 to Aug 31, Sep 1 to Dec 31).3) Make unequal payment for each of the period.For only option 1 & 2 are you entitled to the safe harbor if the estimated payment is 90% of the current year liability or 100%/105% of last year liability (the higher percentage is for those whose AGI is higher than $150,000, or $75,000 if filing MFS).If you do option 3, the safe harbor is per period. The tax can be calculated per period or annualized. Per period means you're doing your tax for each period (i.e., you only consider income, deduction, credit, etc from only that period). Annualized means you're doing your tax from the beginning of the year to the current period. Others have suggested various tax estimating programs you can utilize. This looks like the best idea to me. I wouldn't necessarily rely on the annualized income method exempting you from the potential penalties. If your income is dramaticly different (for example, $0 in the first period, 90% in the last period), your required estimated payment is much less using the annualized method. If you use the per period calculation, the required estimated payment is so much that you actually may overpay. And because the safe harbor is on a per period basis, even if your total estimated payment for the year may be more than you total tax liability for the year and you would still owe penalty because you failed to pay the required amount in each period. So the sooner you pay in estimated taxes that either equal 90% of what you expect to owe for 1999 or 100/110% of 1998 taxes, the sooner any penalties will stop running. is not true. Best for you is to do the calculation for each period--if you underpay earlier, the calculation will take that into account. In your interest, do both method and use the one where you owe the least amount. There is no easy way--simply paying 90% is not enough.
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