Avoiding estimated taxes?

Question

I had a very unusual and, large capital, gain in '07 which triggered an estimated tax payment for '08. I don't expect this type of event to occur again. The IRS wants me to pay estimated taxes for '08, which will cause me to greatly over-pay my '08 taxes.

Is there a way to contest my estimated tax payment?

Answer 1

If last year was unique and you do not have the need to pay estimated taxes, you can disregard the envelopes and letter mailed to you.

Answer 2

The IRS automatically sends out 2008 estimated tax coupons to anyone who made estimated tax payments for 2007.  It's up to you to decide whether your 2008 circumstances warrant using the coupons or throwing them away.  Of course, there will be a penalty if you under-withhold for 2008, but there is no need -- or way -- to "contest" the fact that they sent you the coupons.

Answer 3

IRS presumes you will owe about the same this year as you owed last year.  If your withholding will cover at least 90% of what you will owe for 2008, you do not need to make estimated tax payments and don't need to defend yourself.