Not Enough Taxes Withhold From Paychecks

Tiziano · Joined: 23 Feb 2008 Posts: 4

Due to a large capital gain distribution from a mutual fund, I owe the
IRS additional money for 2007 --and maybe even a tax penalty!
What should one do when finding out that their mutual fund is getting
ready to declare a big capital gain? I mean, what forms do I need to
use in order to estimate my additional taxes? How much time do I have
to pay the additional taxes?
Thanks.
--
tb

--
>
>
>
>
>
>
>
>
>
>

Archived from group: misc>taxes>moderated

ed · Joined: 25 Aug 2007 Posts: 95

On Feb 26, 8:28 pm, Tiziano wrote:
> Due to a large capital gain distribution from a mutual fund, I owe the
> IRS additional money for 2007 --and maybe even a tax penalty!
> What should one do when finding out that their mutual fund is getting
> ready to declare a big capital gain? I mean, what forms do I need to
> use in order to estimate my additional taxes? How much time do I have
> to pay the additional taxes?
> Thanks.
> --
> tb
>
> --
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >

Due to the lack of specific information I suggest you read form 2210
and its instructions and/or Publication 505, but probably the folowing
will suffices: Pay an intallment with a 1040-ES voucher NOW which,
when added to your withholding and/or other installments, will be at
least the amount of your 2006 tax (110% of 2006 tax if 2006 AGI was
over $150K), Then, complete a form 2210 and Schedule AI and pay the
remaining taxs due wih your return. You will have a 8% simple
interest penalty for the amuont of the payment you make from Jan 15 to
the date received by the IRS. Next year make the payment by January
15 for NO penalty. Your mutual fund usually has this information by
mid December.

If your withholding generally covers the tax due on your regular
income the above is all that is necessary. If you don't have a big
gain distrbution you can alternatively pay total of 90%of your current
year's tax, whichever is lower. If the gain comes mid year you must
make the ES payment at the end of that tax quarter, unless you can
increase your withholding to meet one of the above "Safe Harbors".
Return for more advice, if you ned it, after reading the above
referrences

ed.

--
>
>
>
>
>
>
>
>
>
>

Benjamin Yazersky CPA · Joined: 02 Jan 2008 Posts: 41

On Feb 26, 9:28 pm, Tiziano wrote:
> Due to a large capital gain distribution from a mutual fund, I owe the
> IRS additional money for 2007 --and maybe even a tax penalty!
> What should one do when finding out that their mutual fund is getting
> ready to declare a big capital gain? I mean, what forms do I need to
> use in order to estimate my additional taxes? How much time do I have
> to pay the additional taxes?
> Thanks.
> --
> tb
>
> --

>From the info you posted can't tell if you owe a penalty or not.
But, you should pay attention to 2008 planning now, so you won't owe a
penalty next year.

Some mutual funds make available estimates of their year end
distributions in Oct or Nov.
Use these amounts to do year end tax planning.

With regard to your 2007 cap gain distribution, I'll speculate that it
came at year end.
So, when preparing your form 2210, use the annualization calculation.
That should minimize any penalties.
There are also other safe harbors to avoid underpayment penalties,
such as covering 100/110% of last year or 90% of current year.

>>
-----> real address on hobokeni or hobokenx <-----

"This written advice was not intended or written to be used, and it
cannot
be used by any taxpayer, for the purpose of avoiding penalties that
may be
imposed on the taxpayer."

(The foregoing legend has been affixed pursuant to U.S. Treasury
Regulations
governing tax practice.)

The information transmitted is intended only for the person or entity
to
which it is addressed and may contain confidential and/or privileged
material. Any review, retransmission, dissemination or other use of,
or
taking of any action in reliance upon, this information by persons or
entities other than the intended recipient is prohibited. If you
received
this in error, please contact the sender and delete the material from
any
computer.

--
>
>
>
>
>
>
>
>
>
>

rick++ · Joined: 25 Aug 2007 Posts: 328

On Feb 26, 7:28 pm, Tiziano wrote:
> Due to a large capital gain distribution from a mutual fund, I owe the
> IRS additional money for 2007 --and maybe even a tax penalty!

Something called a "safe harbor", i.e. having paid nearly as much
tax as in the previous year, will probably prevent a tax penalty for
2007.

Note that safe harbors generally dont work more than
one year in a row. Once you have a steady stream of untaxed
investment income you have to pay quarterly estimated tax on
it to avoid penalties.

The first 2008 quarter ends 3/31 and is due 4/15.
I usually save a copy of taxcble brokerage statements for the
end-of-quarter months and the that paystub. Then I type
that into the 2210 form in the tax software to see the minimum
tax to avoid a penalty.

--
>
>
>
>
>
>
>
>
>
>

ed · Joined: 25 Aug 2007 Posts: 95

On Feb 27, 10:29 am, "rick++" wrote:
> On Feb 26, 7:28 pm, Tiziano wrote:
>
> > Due to a large capital gain distribution from a mutual fund, I owe the
> > IRS additional money for 2007 --and maybe even a tax penalty!
>
> Something called a "safe harbor", i.e. having paid nearly as much
> tax as in the previous year, will probably prevent a tax penalty for
> 2007.
>
> Note that safe harbors generally dont work more than
> one year in a row. Once you have a steady stream of untaxed
> investment income you have to pay quarterly estimated tax on
> it to avoid penalties.
>
> The first 2008 quarter ends 3/31 and is due 4/15.
> I usually save a copy of taxcble brokerage statements for the
> end-of-quarter months and the that paystub. Then I type
> that into the 2210 form in the tax software to see the minimum
> tax to avoid a penalty.
>
> --
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >

rick: What software do you use that will compute your installment s
on the annualized income method for the current year? or does
your software just divide last year's tax by 4?

ed

--
>
>
>
>
>
>
>
>
>
>

Employer did not withhold taxes. I worked for an electrical contractor past 6 months, i was paid with his Corp check each week, with no tax info. I got laid off and filed for unemployment. They claim no info was given to them by the contractor.A person I spoke to says the contractor mayb

Advantages of having mutual fund company withhold taxes for I'm considering withdrawing up to 10K from my traditional IRA for a first-time home purchase. My mutual fund company offers the option of withholding taxes (at a % I specify) from this distribution. What are the advantages to this? What are the disadvant

Withhold tax for capital gain Hope someone can give me some hints. My wife has some short term capital gains from the stock market this year. However, her financial institute doesn't withheld tax for those gains. I don't want to pay panelty on next 4/15 because of not enought tax wi

Employer did not withhold federal tax... My employer did not withhold any federal taxes from my paycheck in 2003, and I was curious what problems I can expect because of this? Obviously, I am going to owe a boatload to the IRS...but are they going to assess any sort of penalty? Also, I would be

employer did not withhold social security tax for the past 1.5 yrs, my employer has not withheld social security tax. I have been told now that I will incur penalty on the unpaid tax. Questions: a) Isn't the employer liable for withholdng my tax? If that is true, should I not be paying the social sec