ESTIMATED TAX PAYMENTS BY INDIVIDUALS

Taxpayers with multiple sources of income or significant investment gains should be concerned with their quarterly estimated tax payment obligation. In general, you need to make estimated tax payments in an amount at least equal to your actual tax liability for 1998.

There are exceptions to this general rule: If you expect: (1) to owe less than $1,000 in 1999 after subtracting income tax withholdings and credits from your total tax (do not subtract estimated tax payments); (2) your income tax withholdings and credits to equal at least 90% of the tax shown on your 1999 return; and (3) your income tax withholdings and credits to be at least 100% of the amount shown on your 1998 return (105% of the 1998 return if your AGI for 1998 was greater than $150,000).

Remember, in addition to income tax, you must pay estimated taxes on self-employment taxes as well, which includes income from a sole proprietorship and often includes income from a partnership, limited liability company or S corporation.

Non-resident aliens (those who may have arrived in the U.S. in 1999 to work for the first time) may pay the required last installment by January 15, 2000.

There is a penalty for underpayment of estimated tax, however there are exceptions. The underpayment penalty may be waived by the IRS if: (1) failure to pay was due to casualty, disaster, or other unusual circumstances where it would be inequitable or against good conscience to impose one; or, (2) for reasonable cause during the first two years after the taxpayer retires (after reaching age 62) or becomes disabled.

Please contact the office of Gurtu & McGoldrick LLP if you have any questions.