Tax Penalties

[Christian]

Let's see. I am going to again pay substantively more federal tax with my final quarterly payment than I owed and paid last year. In Virginia if you pay the same or more than was paid the prior year you usually owe no penalty. I am not certain if this is applicable under federal law. Last year I called the Practitioner Priority Line and got my penalty excused and still retain a first time waiver if needed. These end of year capital gains are causing distortions with my estimated payments to say the least. Attaching the Form 2210 does not always work as some wise bird at the Service comes back with a quarterly calculation that in no way resembles the actual receipt of my income.

[Lion EA]

One Safe Harbor is If you have w/h and ES equal to 100%/110% of your prior year tax liability. Or, 90% of current year, but that's harder to compute if you have end of year capital gains. Or, owe less than $1,000. If you don't meet any of those, lessen the impact with a quarterly 2210; a lot of work, but you're not paying anyone else to do it !!

[Abby Normal]

That's why we almost always use safe harbor amount for estimates. Then you can wait till 4/15 to pay any amount owed.

And now you'll have to use the longer annualized income method to determine any underpayment penalty.

[Christian]

A quarterly 2210 ? Not familiar with that. My quarterly payments are pretty close until the last quarter when these gains are dumped. Good Lord this year my capital gains exceeded by nine times my last full year salary at my former employer !! I swear I'll need to take a darn bank loan !!

[Lion EA]

The "long form." Form 2210 Part IV or Schedule AI, whatever can lower your P&I.

I tend to use the Safe Harbor of paying 100%/110% of prior year tax liability.