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Re 2005 estimated payments

I seem to remember from my years of speaking with professional tax planners that estimated payments should try to match income as earned through the year, OR be done in equal amounts equal to the previous year's tax liability, whichever is LESS, paid before appropriate dates.

I'm retired. 2003 booked income was much much lower than 2004's because I realized very few capital gains that year. Federal tax liability was an embarrassingly low number (low 3 digits.)

In 2004, the reverse happens. Non-cap gains income about the same (divs/interest) but realized cap gains pretty high (6 digits.) I sadly lose the child credits and have to shell out a more reasonable amount of cash to Washington. Most of these CGs were booked very late in 2004. I paid a nominal amount of estimated tax based on the assumption that I was in compliance based on 2003 tax levels.

I don't anticipate booking tons of cap gains this year, but there will be some. Similar to 2003. I don't want to pay quarterlies equal to 1/4 of 2004 levels, though I really have no clue now what my booked income will be. The market is a fickle beast.

What should I do? What will trip up my planning and force me to pay a late penalty? Due to irregular income like cap. gains, can one really get nailed by Uncle Sam for not knowing ahead of time what one will book?


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