Discussion:2006 Underpayment penalty proof assistance

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Discussion Forum Index --> Tax Questions --> 2006 Underpayment penalty proof assistance


Vermontcpa (talk|edits) said:

13 January 2007
Am i right that if Single taxpayer pays equal to total tax liability from 2005 in 2006 that there is no risk of underpayment penalty?

This assumes AGI < $100k

What if taxpayer withholds equal to 2005 tax liability but in 2006 upon filing still owes > 10% of 2006 total tax liability?

I am calculating here and what to bounce this off the experts here.

Thanks

Sandysea (talk|edits) said:

13 January 2007
Is the 2006 liability less or more than the 2005 liability? BTW: I LOVE VERMONT!!! Go Patriots!!

Blrgcpa (talk|edits) said:

13 January 2007
If the increase is more than $40,000. est payments s/b made.

Deback (talk|edits) said:

January 13, 2007
In your case (and not married separate), if the 2005 total tax was paid in 2006 through withholding and/or quarterly payments, and then taxpayer owes more than 10% of the 2006 tax, there will be no penalty for underpayment of estimated tax. See page 1 on Form 2210 Intructions under Who Must Pay the Underpayment Penalty.

Deback (talk|edits) said:

January 13, 2007
Also, see Waiver of Penalty in the same instructions for certain exceptions.

Death&Taxes (talk|edits) said:

13 January 2007
The taxpayer is safe; 100% of 2005 taxes was paid equally, as I read your question. It is only a question of when he wants to pay the liability. You might alert him to the fact he might also have a first quarter 2007 payment to make based on final numbers.

Deback (talk|edits) said:

January 13, 2007
Blrg - I think the $40,000 rule no longer applies. I haven't seen anything about that in a few years. Am I missing something? Also, see 1040-ES Form and Instructions

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