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I am a little confused on one point. I thought that once you selected either: Method (1) 100% of last years taxes; or Method (2) 90% of current year's taxes -- you are stuck with FIXED quarterly payments using whatever method you initially selected. In other words, I did not think you could adjust/ manipulate your SE payments? I thought I read somewhere that if your quarterly payments arenot uniform (i.e same amount, then the IRS will automatically hit you with a penalty. Is this correct?

There's two things here: 1. How do you decided how much to pay each quarter, and 2. After the year's over which Method reduces or eliminates your penalty. If you choose 1/4 of last year's tax, and pay them on time, you'll have no penaltyi. If you choose to estimate 90% of current year's tax and your income incrases, you'll have a penalty.

Sometimes you can use the Annualized Income Method to reduce your penalty if the large unexpected gain comes later in the year. If you can accurately calculate the AI Installments BEFORE you pay them you get the best of both worlds---the lowest available installments, and no penalty. The IA uses whichever method produces the lowest payment for each installment.

Also, do I use the edcosoft after I do finish my 2006 taxes on Turbo Tax?

You use the "edcosoft" to compute each installment after you get your quarter data (March 31, May 31, August 31 and December 31) so you can pay it before it's due (April 15, June 15, September 15 and January 15 ). If your tax program doesn't do it correctly, use the edcosoft to figure the lines of the 2210 and manually complete it. However, TT willl ask you if o want to use their AI Method if you have a penalty. TT's AI should be accurate, it just isn't available when you needed it.


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