Tax Answers

February 19, 1994

Here are answers from members of the Maryland Association of Certified Public Accountants to readers' tax questions. The Sun will publish answers through April 15.

Q: I'm 61 years old and retired. My retirement income comes from monthly withdrawals from an IRA mutual fund. From each month's distribution, I have 20 percent deducted for federal income taxes. My total federal tax bill never exceeds 20 percent of my income. Do I have to submit federal quarterly estimated tax forms?

A: No, as long as you know that your federal balance due after subtracting your withholding is less than $500. Even if your balance due is expected to be $500 or more, you may still not have to make estimated payments if you meet one of the following requirements:

* Your 1994 withholdings are at least 90 percent of your federal tax liability for 1994, or:

* Your 1994 withholdings equal at least 100 percent of the tax shown on your 1993 return. The 1993 return must cover the full year. If your Adjusted Gross Income for 1993 (Line 31 of Form 1040) is more than $150,000 ($75,000 for married individuals filing separately), then your 1994 withholdings would have to equal or exceed 110 percent of your 1993 tax liability, instead of the 100 percent requirement.

There are additional exceptions from making estimated payments such as not having a tax liability for 1993 or an "Annualized Income Installment Method" to determine any required quarterly payments. Refer to IRS Publication 505 for details and examples.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary. Consult with a tax adviser for specific advice.

Readers may submit questions by phone, mail or fax. Selected questions will be answered in The Sun and The Evening Sun.

To ask a tax question by phone, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll County 848-0338. Using a touch-tone phone, enter 6120 after the greeting.

Written queries may be sent to TAX QUESTIONS, The Baltimore Sun, Business News Department, 501 N. Calvert St., Baltimore 21278. Fax questions to (410) 783-2517. Callers are encouraged to leave their names and phone numbers should questions need to be clarified. Names will not be published. Questions will not be answered by phone.

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