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Thank you Phil. The Annualized Income Method of figuring your penalty was designed exactly for Brent's situation, where income appears to be dropping from the level of the prior year, but if you try to estimate current year's income and tax you could incur a penalty for underpaying early installments if income unexpectly increases later in the year. The AI Method is the ultimate "Safe Harbor" because in addition to allowing you to use the prior's year's tax Safe Harbor it automatically adjusts and computes a revised installment due for a changing "Safe Harbor" of 1/4 of 90% of current year's tax. Since the installment it computes is based on ACTUAL tax computed on actual income it eliminates any penalty for underestimating any quarter.

Further, you can actually manipulate your early year AI installments even lower by making IRA or Pension deposits early in the year, paying your house taxes and interest and otherwise itemizing Schedule A, even if you don't actually itemize for the full year, and applying Deductions and Credits as soon as they are earned (or carried over from the prior year), PLUS shifting income such as RMD and Capital Gains to the last quarter (where your LTCG distributions already are).

P.S. We have uploaded our 2007 edition to our web site to compute this year's installments. Thank you, again.

ed



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