Estimate Taxes? Get familiar with the new tax law now

By James McNair The Cincinnati Enquirer

    For most U.S. taxpayers, the best ways to respond to Wednesday's $350 billion tax relief package is to sit back and enjoy it. But for those who pay estimated taxes during the course of the year, a sit-down with an accountant might be in order.

    People in business for themselves and investors who rely on income from securities estimate their taxes and submit payments four times a year. Estimators account for almost a fourth of the income taxes paid by individuals.

    With congress cutting tax rates on regular income, dividend income and stock profits, those who estimate taxes face the possibility of changing their multipliers and formulas this summer - if not sooner. For the most part, the lower income tax rated kick in July 1. The new capitol gains tax applies to investments dating back to May 6.

    The next deadline for filing estimated taxes? June 16.

    Clint Stretch, director of tax policy for the accounting firm Deloitte & Touche in Washington, said people who file estimated taxes are those who will need to bring themselves up to speed most quickly with the tax law.

    "If you have a lot of investment income or if you are self employed, your tax rates are going to be significantly lower, and you'll want your accountant to look at that to see if your estimate is the right amount," Stretch said. "If you pay the old rate, you might be giving Treasury secretary (John) Snow a $20,000 loan."

    More people estimate their taxes than one might expect. In a preliminary review of individual tax filings in 2001, the Internal Revenue Service reported $211.4 billion in estimated taxes, or 24 percent of the $892.3 billion collected. In 2000, the percentage was 23 percent.

    Linda Tracy Gill, owner of TransAct, a tax accounting and financial consulting firm in Madeira, agreed that people who make estimated tax payments should pay immediate heed to new rules. She sees no need to put it off until the third-quarter deadline in September.

    "I'm never a fan of giving the government more than what it's entitled to," Gill said. "I would tell people to take it into account for the payment due June 16."

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