Backending estimated payments.

The increase in corporate estimated tax payments for the 1992 tax year makes it even more advantageous to "backend" estimated tax payments as much as the rules allow. Most corporations use annualized or adjusted seasonal installments under Sec. 6655(e) to minimize early installments. However, some taxpayers with net operating losses (NOLs) or credit carryovers may be able to use an even greater backending of payments.

Rev. Rul. 67-93 allowed a deduction of an entire NOL amount prior to annualization. The ruling stated that, for underpayment of estimated income tax by a corporation, "the entire amount of a net operating loss carryover should be deducted from the income for the appropriate period . . . prior to annualization of the income for such period."

The significance of this ruling is best illustrated in the example above. It is apparent from this simple example that the results of using the NOL prior to annualization are significant. First quarter estimated taxes are significantly reduced.

Rev. Rul. 79-179 provided a simplar rule for investment tax credits (ITCs). ITCs are not annualized for purposes of determining whether the exception of Sec. 6655(d)(3) has been met; only actual credits are allowed. However, the credit limitation should be computed on the annualized tax. The result is to allow more ITC carryovers to be used in earlier quarters. although this ruling specifically applies

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to ITCs, it would appear to apply to any credit whose limitation is based on tax.