got a note, they want expected tax. All I have is a couple cds, they dont come open till dec. I could proberly figure how much I,m going to make but I cant touch the money till dec.
How do they expect you to pay a tax on money you haven t made yet.
What do yall do. If you dont pay the expected, I know there a penaty. is that all or do they take your house. Paying at normal tax time no problem.
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Haga su trabajo de fricken
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Replies
Just a penalty BB. First two years I was in business I took the penalty because of cash flow problems. What I learned is that it's just easier to make the estimated quarterly payments as it eases the burden in April. BTW.... I thought you were an employee? Whatcha doin' making estimated tax payments? Or am I missing something as usual?
He said interest on CD's.Does not matter what the source of the income. Dividends and rental income are the same.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Oh, I see.... I thought he was saying he wanted to cash in the CD's to pay off his tax bill. Like I said.... I'm usually missing something.View Image
you are both right. the money being made is cds. the money to pay the tax is what I make in the cd.Haga su trabajo de fricken
Isn't the IRS great?..... You gotta find ways to make money to pay the IRS money, on money you haven't even made yet.... and then they'll want to take part of that money too! That's just perfect. LOL.View Image
If the INTEREST you have coming from some CDs is enough that you're worried about it triggering an estimated tax penalty, you should be retired and enjoying life on a South Sea island or some such.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
well anything over a $1000 will trigger an estimated tax..Haga su trabajo de fricken
Plus you have to be 10% over your previous year's total, IIRC.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
How are dividends and rental income the same? Dividends go on a 1099, rental income is business income.
"I cut this piece four times and it's still too short."
First of all rental income is NOT BUSINESS income it is investment income. Lots of differences in the way that it is treated. But one of big ones is that on business income you pay Self Employment taxes (SS), but not on investment income."How are dividends and rental income the same?"The question was how come BB was being asked to pay estimated income taxes when BB was not self-employed.My answer is that for est taxes ALL income is counted. Now what the amount of each type of income, and ofsets against that, ect, ect is needed to actually figure the real tax liability and from that (or more accurately guestimates of that from past years) is used to figure estimated tax liability and from that and any withholdings then you figure estimated taxes..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Are you talking about ESTIMATED taxes?
If so there is a penalty that is figured (or the IRS will figure it) when you do the taxes. In general it is not very high.
IIRC there are 3 ways out.
One is that if you don't own more than $500 over what was already paid in estimated and withholding taxes.
2nd is if you have paid (agian in estimated and withholding) as much as you paid last year (with some exceptions for large jumps in income).
3 rd if you paid it all before "due". Don't remember the wording, but the 4 estimate is due Jan 15. I think that you can pay up what is due then and not have any penalty.
Now if this is taxes that where not paid for 2006 then there are several layers of penalties and interest and they accure each month.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
due Jan 15. I think that you can pay up what is due then and not have any penalty.
Not true. IRS hits you for interest on what they think you should have paid in an earlier quarter.
Been there, got hit. Penalty usually in just 3 figures, but then never had a 7 figure income either.
The first tax book you want to read is "What the IRS DOESN'T want you to know." It does a fine job of using simple language to explain how the system works.
Simply put, the tax man wants to hold on to your money for you until tax time ... where a small adjustment (payment or refund) will be made. Wage earners handle this with their money being withheld from each paycheck.
For other income, the taxman wants you to guess, pay it up front, and make the correction when you file. They don't want you to be faced with a big bill when the return is filed. So, you are expected to estimate your annual income ... and pay quarterly. If your estimate is off too much, they may assess penalties.
Otherwise, monies are not taxed until they are earned (or due). If your income is irregular (say, seasonal work), then it is very possible that your quarterly payments will not be identical. Likewise, the December payment is often smaller than the others, as you are correcting for overpayments you made in the previous quarters.
For a more specific answer, you really need to speak to a CPA, a tax attorney, or a registered agent.
After all .... you wouldn't ask your accountant to wire your house, would you? So why ask tradesman for tax advice?
I always took the penalty, just a cost of doin' business. Now I'm Sub S 'stead of LLC so I make weekly deposits on-line but still have to pay on increase of the value of my company.
Talk to your accountant, the tax penalty is likely minimal.
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"You cannot work hard enough to make up for a sloppy estimate."
bb,
I could be wrong but; i seem to recall a few good heads here stating that they take the penalty rather than pay the estimated, as a matter of course.
Estimated invested or used/needed as capital, combined with the bookeeping/accoutants fees for estimated taxes paid..............seemed it was a better choice to pay the rather small penalty.
I could be wrong though.[email protected]
" Now I'm Sub S 'stead of LLC so I make weekly deposits on-"That is not YOUR estimated taxes. Rather that is withholding and the employers part of the SS taxes..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
<< " Now I'm Sub S 'stead of LLC so I make weekly deposits on-"That is not YOUR estimated taxes. Rather that is withholding and the employers part of the SS taxes.>>Right you are of course. But the point is that as an employee of an S-corp most of what I was paying in estimated taxes before is now handled by my weekly withholding. So all I have to pay estimated taxes on is retained earnings and profit distributions. Which I still choose to pay on April 15th rather than quarterly. I understand that taking that penalty is not necessarily the smartest thing to do but it's an old habit by now and a hard one to break. ------------------
"You cannot work hard enough to make up for a sloppy estimate."
Brownbagg,
There are some credit unions that will let you use your CD for a loan... What the local Educational Employees' Credit Union will do is charge you 2% interest above your CD's interest....
Borrowing money for up to 3 years for 2% interest sounds great to me.... Plus, when you've paid your loan, a $10,000 will have earned you about $3,000 in interest, so you loan is paid off and your CD is now worth $13,000..
Bill
But why should I borrow money to pay a tax on money that have not earned any money yet. The cds come out in dec..Haga su trabajo de fricken
Depends on your accounting basis. If you're on a cash basis, you earn the money when paid, but, if you're on an accrual basis, you earn the money as the interest is compounded. Or monthly. Or quarterly. Talk to your accountant about your specific details. If your accounting system is on the % of completion system, you earn the money according to how complete the project is. When your paid doesn't signify anything.SamT
Most of this was stated previously. To sum up.....
You probably received the estimated forms because you owed last april 15th. They think you might owe this year and would like the money in advance or you may have to pay a penalty.
Required annual payment—safe harbor. For 2006, individuals are subject to an underpayment penalty unless total withholding and estimated payments equal the smaller of:
• 90% of the tax shown on the 2006 return, or
• 100% of the tax shown on the 2005 return (110% if the taxpayer’s 2005 adjusted gross income, or AGI, was over $150,000 ($75,000 for MFS).
Underpayment penalty does not apply if:
• The tax due after subtracting withholding is less than $1,000.
• The taxpayer was a U.S. citizen or resident and had no tax liability on a 2005 return that covered 12 months.You get out of life what you put into it......minus taxes.
Marv
Does interest accrue on the CD's monthly? If so, even though it isn't paid to you until it matures, the interest is still income as it accrues. If you have a regular bank account that pays interest, you get taxed on it even if you leave it in the account.
Besides, the Government needs the money now to start paying Alberto Gonzalez' pension.
You just happen to be on the wrong end of the year. If the CDs came due in January, you could pay taxes on that income in quarterly installments up to a year after you received the income.
It still probably wouldn't be worth waiting for the new year to roll them over, but you could figure it out.
As has been noted, you don't absolutely have to pay estimated tax on money not yet earned, but if your income is irregular (such as a pile earned in the last quarter), then you'll have to prove it to the IRS. That is done with Form 2210 (edit - see below). You can download it from the IRS site, with instructions, and look it over. It provides a way of showing what you earned, quarter by quarter, and what total withholding and estimated tax payments were made, also quarter by quarter. Depending on how big that last quarter chunk of income is, relative to the rest, you may not have to include the form with your return, but the instructions will explain that. But as long as you've paid the minimum estimated+withholding total due by the end of any quarter (4/15, 6/16, 9/15, 1/15/2008), according to what you've earned up through the end of that quarter, you're ok and no penalty will be due for underpayment. HTH.
Correction: that is Form 2210. Link is: http://www.irs.gov/pub/irs-pdf/i2210.pdf
Edited 8/27/2007 11:51 am ET by DickRussell
Form 2210You get out of life what you put into it......minus taxes.
Marv