Out tax structure is a "pay as you go" system and there are substantial penalties when taxpayers underpay their taxes during the year. Although some taxpayers prefer to invest the funds during the year and pay in a lump sum at tax time, the nondeductible underpayment penalties are generally higher than the prevailing bank interest rates. So unless you obtain a return on investments substantially greater than bank interest, it is better to pay as you go.

It is not always easy to predict your tax bite during the year and for that reason, the tax code provides what is referred to as safe harbor estimates. The underpayment penalty will not apply if a taxpayer:

• Owes less than $1,000
• Pre-pays an amount equal to 90% of the current year's tax
• Pre-pays an amount equal to 108.6% of the prior year's tax

If you have had or anticipate any significant variations in income or withholding during the year, it might be appropriate to contact me. I can project your taxes for 2000 and recommend steps to minimize your tax liability and penalties.