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    Mutual Fund

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    A taxpayer receives a $40,000 capital gains distribution in December from a mutual fund. Assuming no estimated tax payments were made during the year and his only withholdings were from his W-2, what can the taxpayer do to avoid an underpayment penalty? How can this taxpayer avoid this situation in future years?

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    Student, This can all be avoided with a little planning.

    Question:
    A taxpayer receives a $40,000 capital gains distribution in December from a mutual fund. Assuming no estimated tax payments were made during the year and his only withholdings were from his W-2, what can the taxpayer do to avoid an underpayment penalty? How can this taxpayer avoid this situation in future years?

    Answer: Whatever CPA or Tax Advisor does your taxes, ask them to tell you what you owe in 2008, and if you take out the same $40,000 capital distribution then Estimate what your unpaid tax may be for 2008, and then pay 1/4 of it on April 15, June 15, Sept. 15, 2008, and Jan. 15, 2009. Complete form 1040-ES to submit with each payment. (If the due date falls on a Saturday or Sunday, taxpayers will have until the following Monday to make the payment.)

    Here's exactly why...
    Many taxpayers receive their tax returns from ...

    Solution Summary

    A taxpayer receives a $40,000 capital gains distribution in December from a mutual fund.

    $2.19