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<< This year, the accountant shows he owes $1250 in taxes.>>

<I don't see anything strange here. There was withholding on his wages, but not in the income from
the S-corp. The S-corp income went up considerably, thus his taxes went up. Since his wages didn't go up, his witholding didn't go up. Thus he owes more come April 15.>

That's my guess, too. One additional point, though. If you owe over $500 on your final return, you may get hit with interest payments. You should have been making estimated payments each quarter in 1997(form 1040ES). For 1998, the amount was raised to $1000 before interest & penalties kick in. Just one more thing to keep in mind, as though taxes are the only thing you think about :)

If the IRS catches it, they'll send you the bill later. No need to worry about it now, but just a warning that you may get a letter from them asking for more money. There are other qualifiers (having 1997's withholding equal at least 90% of 1996's total tax) that may apply to avoid interest/penalty.
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