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From: wildbill@ucbvax.UUCP (William J. Laubenheimer)
Newsgroups: net.politics,net.taxes
Subject: Re: Question About DEFICIT REDUCTION ACT
Message-ID: <1420@ucbvax.UUCP>
Date: Thu, 26-Jul-84 04:05:23 EDT
Article-I.D.: ucbvax.1420
Posted: Thu Jul 26 04:05:23 1984
Date-Received: Sat, 28-Jul-84 05:59:31 EDT
References: <3147@tektronix.UUCP> <584@inuxd.UUCP>
Organization: U.C. Berkeley
Lines: 42

> Can the government change the tax law in the middle of a tax
> year and penalize you if you owe more taxes at the end of
> the year than you thought you would under the old law?

> Dave Claus
> AT&T-CP Indy

They most certainly can. I am in the middle of a mild hassle with the IRS
right now which was created by the ill-fated dividend and interest
withholding measure which was proposed in 1982 and voted down in 1983.
Since I am an RA (tax-exempt), a substantial majority of my income comes
from dividend and interest income. The instructions for the 1983 Form
1040-ES specified that in figuring your 1983 taxable income, you were to
assume that 10% of your dividend and interest payments were to be withheld.
On this basis, my tax liability was below the cutoff of $300. When the
House finally decided not to pass the measure in June, I paid two installments
(since this change occurred after June 1, which was the last date for which
income could affect the June 15 estimate) covering the amount I had
expected to earn from interest and dividends.

OK, now comes April 15, 1984. I file, showing a small overpayment which I
apply to the next year's return. The IRS comes back and says "Because you
didn't pay at least 20% of your tax liability each quarter, we are going
to hit you with penalties and interest unless you can produce a Form 4612
[I think that was it - wjl] explaining why we shouldn't". On this form
you are allowed to reduce your first and second quarter underpayments by
5% of the dividends and interest subject to withholding. That's right - 
5%, not the 10% they told you to assume when you were filling out your
1983 1040ES. Only the fact that all the amounts were small enough that I
hadn't earned my zero-bracket amount by June 1 saved me. (Not that the
penalties were all that big - we were only talking about $20 or so -
but it's the principle of the thing.)

So yes, they can change the rules in the middle of the game. And no
notification was given until the 1983 forms were sent out, either.
Foo on the IRS (again!).

                  ____                  Bill Laubenheimer
      ___       /      \       ___      UC-Berkeley Computer Science
     /   \     |  o  o  |     /   \     ucbvax!wildbill
------+++----------()----------+++------
          ...Killjoy was here!