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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121429  
Subject: Re: Pay estimated taxes or turn a blind eye? Date: 4/13/2001 10:09 AM
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Same area slightly different question. In 2000 I retired in Septempber
and received a years pay in severence and stay bonus compensation.
Just used Turbotax to do my returns and discovered I am being called
upon pay estimated taxes for 2001.

This year I expected to recieve about 40% of my normal pay plus Soc
Security along with my wife's salary from teaching. Overall income
(not AGI) for 2001 will be approximately 1/2 of 2000 AGI.

What are the possible consequences of not paying the estimated tax? I
have no desire to get sideways with the IRS but assume the ETax was
applied because of last year's income which was an anomoly.

Need some help and expertise.


Norm: Ignore TT. Also don't pay 1/4 of last year's tax each quarter. The niftyest thing to do is have your wife's employer overwithhold enough in December to cover 90% of your 2001 taxes. Since it is dangerous to try to estimate the current year's tax due to possible Capital Gains distributions in December, you may go back to work, etc., be prepared to pay an installment in January and have to complete the full Form 2210 and Schedule AI. IF the December overwithholding is enough, when averaged, to eliminate the penalty on early quarters the January installment will stop any penalty due to late year distributions.

We have a quarterly tax installment calculator at http://www.edcosoft.com/qitc.html if you have EXcel97 to run it. You can downnload a free demonstator that will compute your minimum first installment and full year 2001 estimate. It will also help you juggle the withholding and keep track of each quarter's income. ed

Your safest thing is to *try* to estimate 2001 taxes and increase your wife's withholding to cover 90% of it. If something unusual happens later in the year, either have her employer overwithhold in December or pay an installment and file Form 2210 Schedule AI.
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