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NEW LAW WILL FORCE TAXPAYERS TO BE 'FORTUNE' TELLERS -- LITERALLY

 NEW LAW WILL FORCE TAXPAYERS TO BE 'FORTUNE' TELLERS -- LITERALLY
 NEW YORK, Nov. 25 /PRNewswire/ -- Upper-income individuals, who have for years paid estimated taxes, may soon need to acquire a knack for predicting the future. Under the new law that extends unemployment compensation, taxpayers filing joint returns and earning more than $75,000 must be able to accurately forecast their future income. If they predict wrong, there will be substantial penalties, warns KPMG Peat Marwick, the leading international accounting and consulting firm.
 "In addition to the extra burden on higher income individuals, a big concern for these taxpayers will be the complexity of having to guess at future income," says Robert M. Brown, partner in KPMG Peat Marwick's Washington national tax practice. "These days, with the emphasis on simplifying taxes, this is a giant step in the opposite direction."
 Individuals who expect their adjusted gross income to increase by $40,000 or more are subject to the new rule, which becomes effective in 1992. These taxpayers will now have to make estimated tax payments at least equal to 90 percent of the tax liability for the current year in order to avoid penalties. This is in contrast to the existing rule where taxpayers avoid penalties by paying in an amount equal to 100 percent of the tax liability reflected on the return for the prior year.
 "Many believe that this will create a hardship for the very wealthy only," observes Brown. "This simply is not true. Many groups of taxpayers are vulnerable and will be caught off guard." Among such individuals are: consultants; authors and artists; retirees who receive a lump sum distribution; partners in a general partnership; lawyers; and sole business proprietors.
 Although the law also allows taxpayers to calculate their estimated tax payments based on annualizing their actual income and deductions through the end of the month preceding each due date, taxpayers only have 15 days each quarter to compute their actual income and deductions and determine their estimated tax payments using this method.
 KPMG Peat Marwick provides accounting, auditing, tax, and management consulting services to leading businesses, governmental and private institutions and individuals through 135 offices in the United States. It is the U.S. practice of KPMG, which has operations in more than 120 countries and posted 1990 revenues of $5.4 billion.
 -0- 11/25/91
 /CONTACT: Barbara Kraft of KPMG Peat Marwick, 201-307-7286/ CO: KPMG Peat Marwick ST: New York IN: FIN SU:


GK-JT -- NY039 -- 6837 11/25/91 12:14 EST
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Publication:PR Newswire
Date:Nov 25, 1991
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