You guys are scaring me. The IRS made a mistake on our tax refund for tax year 2000 and failed to apply the correct amount from our refund to our estimated taxes for 2001. In other words, my return said to apply $2000.00 out of our refund towards estimated taxes for 2001 . However, the IRS applied $20.00 and sent me the rest as a refund. I added the difference into the June estimated tax payment (which, BTW, I also got late because I thought it was due in July).

I worked out the 2210 and all the numbers and am paying estimated quarterly taxes on our small business earnings as 90% of our last year's tax to benefit from the Safe Harbor Rule. I will still owe a good-sized chunk since our earnings were higher this year than last.

sooooo..... to finally get to my question...... Should I just pony up the amount I expect to owe for 2001 since I blew (and so did the IRS) the Safe Harbor timeliness rules on estimated tax payments?

Thanking you in advance for pointing this out...