Posted on 04/14/2017 2:29:46 PM PDT by SteveH
i’m not an expert but at one time looked into paying estimated quarterly taxes and it seemed to me like if one did that, and didn’t get the amounts right, the penalty was worse than not doing it at all.
Also, one of the clauses about withholding penalties stated that if one had withheld at least 90% of what one owed during the previous tax year, then no penalty would apply to the current year no matter what. i interpreted that to mean every other year could be a freebee withholding-wise and did actually take advantage of it.
You might want to look into the above.
A couple years back they selected my MIL's estate tax return for an audit, and the audit resulted in a reduction of the estate so they sent a check back for $125K in over-payment of the estate taxes. Then, they levied a fine for not paying the estimated taxes on the tax refund.
Your required to pay 90% of your actual 2017 tax. (The exception to not pay a penalty is 100% (or 110%)of 2016 tax, but this does not benefit you if you have lower income.
You can be penalized if you pay less.
Check out Form 2210. There are exceptions for annualized calculation.
What did your CPA tell you?
Griping or bragging?
LOL -- probably OK on a one-time windfall, because they can't expect you to anticipate such a thing. But if you look for another spike in the following year, you need to prepay, or there's a penalty.
Also, if you're on Soc Security/Medicare, you will get means-tested out of some of your SS check, as it will be used to pay for a larger chunk of your Medicare premium. Because, for one year, you were too rich.
You should consult a CPA. Not this buncha rightwing reprobates.
Yup. I do enjoy these threads though. The advice given is quite often good for a few chuckles.
Do your best to estimate the actual amount of tax and pay that in quarterly. If you are short, you will only have to pay 3% to 4% of the underpayment on the average outstanding balance. So if you owe 10,000 and did not pay it in with estimates your average balance would be $5,000 and your penalty is $150 to $200.
Don’t sweat it.
However, some states have much larger penalty percentages and you might want to over estimate the amount due.
Oversimplified example: you make $90,000 on a W2 job, $10,000 on outside work not subject to withholding. You do not have to make a quarterly payment. (YOU WILL have to pay taxes on the $10K next April.) If you make $15,000 on the outside job, you MUST make quarterly payments or you WILL be charged penalties and interest.
Note I am Oversimplifying, and talking here about net taxable, not gross income. Also some seasonal work and farmers and fisherman have special exemptions.
Oversimplified example: you make $90,000 on a W2 job, $10,000 on outside work not subject to withholding. You do not have to make a quarterly payment. (YOU WILL have to pay taxes on the $10K next April.) If you make $15,000 on the outside job, you MUST make quarterly payments or you WILL be charged penalties and interest.
Note I am Oversimplifying, and talking here about net taxable, not gross income. Also some seasonal work and farmers and fisherman have special exemptions.
That’s 100% correct. Freedumb, you’ve said a number of things on this thread which are not correct. You need to get an accountant — and he should review your recent filings. The IRS WILL usually send you quarterly vouchers IF you file Schedule C, but whether they do or not, they WON’T exempt you from penalties because of an error on their part.
i should have paid as it was happening but busy. i was consulting, not an accountant, and i actually did not know what would happen from week to week. as it turned out, the spigot shut off in july. i panicked in december and mad YUGE payments to fed and state but by then too late to affect this year’s 1040ES as turbotax calculates (which i imagine is correct). this year is only the second year i was consulting and it was only about 9 months total, spanning a winter. The large checks kept rolling in and fortunately i did not spend it. it could have been worse had i regarded that money as “mine” for some odd reason lol. I think i could do better in the future, but i doubt that i will ever be in a similar situation again, so in all likelihood it is a one-off or two-off situation. The original plan was to go to an accountant at the beginning of last year. I ended up going to one a week ago and offering to cast my lot with him, but he wanted all original documents such as mortgage which would require even more plowing through more rooms stacked high with layers of papers, ugh. He briefly answered the one open question i had off the cuff and that brief answer was (to my pleasant surprise) enough to get me through turbotax a week before the deadline. To gather all the old paperwork might have taken several more days (I know, procrastination, guilty as charged lol). Turbotax makes it relatively easy to coast through year by year if one started using it way in the past. I also always doublecheck to make sure i am well inside the green band for audit danger and i try to keep any ambiguity errors in favor of the government in case of any later audits. For better or otherwise, I don’t think I have ever had to pay a penalty using my methodology.
That is an idea. No, I won’t have another extraordinarily high year (unless perhaps DC gets down to some really hardcore DOD retooling). I will look into that, thanks. Those were only at the $2k/quarter level for me this past year, so no biggie if i can just remember to make them all...
Only $125k over what you normally make.? : )
I wish I was smart like you!
It is funny-wierd. I panicked last December and wrote a YUGE check to the IRS and another to California, based on my straight line extrapolation estimation of 2016 taxes based on my 2015 taxes. Over christmas vacation, i panicked again because i realized that i had neglected to factor in the progressive bump that occurs at a certain level. so i made a more careful estimate based on the 2016 tax tables. However, as it turned out, turbotax told me that my original december YUGE checks were more or less sufficient (putting me within 1k or 2k of the actual taxes owed, one way or another). I’m not sure why that happened, but I think when all the dust settled, my income estimate of mid January of this year was about $25k on the high side. Maybe subtracting that amount brought me on the low side of one of the progressive tax rate singularities. With all the large amounts floating around, and not being a CPA myself, I was reasonably happy with being on the safe side in my over-estimates. Due to lack of spending spree I was able to afford writing the extra checks in January and I am now anticipating getting that money back. If I made a minor mistake somewhere, the IRS will hopefully catch it and recalculate my correct tax rate, dipping into the extra reserve tax that I have already paid (on the order of $6k which I imagine should ordinarily be enough to handle some relatively minor accounting error).
Yah i seem to have skated around the edge of disaster this past two years so far without an S-corp. but if a certain project ever gets fired up again then i may have to revisit that decision. I am not however holding my breath that that will happen. So la la, live for today.
I find FR folks are mostly reasonable and trustworthy. I am keeping my eyes out for “the usual suspects.” If I see any of them, I will probably just silently discount their advice. So far, so good, I think.
No, I do not. Yes, your assumption is correct.
Thanks.
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