<< Back to all Blogs
Login or Create your own free blog
Layout:
Home > Nice surprises, question for tax experts

Nice surprises, question for tax experts

March 21st, 2015 at 02:40 am

Got our tax packet back today, and there was a nice surprise the guy didn't mention in his email: AS is getting a $646 property tax return!

Also, NT got notice from one of his student loans that they're giving him a 1% reduction in his balance for good grades. Only $45, but we'll take it!

I got a callout in the daily work schedule email that it was my nine-year anniversary at work! Seems like a lot, but when I think about how much has changed (and how much I'VE grown and changed) since I started there, it makes sense. I should get a $25 gift card at the next staff meeting.

Annual performance reviews are coming up for everyone at work. My boss stopped by to let me know that I wouldn't be eligible for a raise since I've gotten one so recently, but that he thought I was doing really well and he could see another promotion in my future, maybe next year. Smile

So on to my question: Tax guy said he'd provide a recommendation of how much AS should send in for taxes based on last year. I told him that AS is likely to make a lot more this year and asked if there were a certain percentage or other formula I should use to figure out how much to send in.

His answer: "I would say for AS it's best to pay the Estimates I prepare (as a minimum), unless she wants to increase them. If she keeps making money then start bumping up June 15 estimate etc."

So today, I got his estimated quarterly amounts: $1030 for federal and $240 for state.

I've been setting aside 14% for federal and 6% of state from every check she receives, and so far for Jan-March I have $2,594.86 for federal and $1,112.08 for state. I know I'll have more before March is over.

So my question to you: Is there any reason to pay in the smaller amounts the tax guy suggested, or should I just pay in what I've saved up? I feel like she's going to owe even more than I've saved, so I don't see why I should send less. But maybe I'm missing something.

Posted in Uncategorized | 5 Comments »

5 Responses to “Nice surprises, question for tax experts”

  1. Mickeymickey1975 Says:
    March 21st, 2015 at 04:00 am 1426910429
    1426910429

    Some people don't like to pay the government before they have to, and would rather earn interest on the money (even if it is a tiny amount) and pay when it is due. Sounds like your tax guy set up penalty proof estimates based on 2014 income.

    If the above doesn't apply and you feel better paying now, go for it.


    16year CPA here Smile

  2. doingitallwrong Says:
    March 21st, 2015 at 01:39 pm 1426945147
    1426945147

    Right, there's a Federal "safe harbor" that says if you pay in 100% of your total tax for the previous year (or 110% if your AGI is greater than $150,000), you will not be assessed a penalty for underpayment of estimated tax. (I believe most states have a similar exception, but you might check your state just to be sure.)

    You can use the IRS withholding calculator throughout the year to see where you are. Of course AS won't have actual withholding, but it will tell you how much you're likely to owe at the end of the year.

    http://apps.irs.gov/app/withholdingcalculator/

  3. ceejay74 Says:
    March 21st, 2015 at 01:49 pm 1426945775
    1426945775

    Interesting. OK, I'll have to look at it and think whether to put the extra in savings until next year or pay it now.

  4. Dido Says:
    March 21st, 2015 at 02:33 pm 1426948389
    1426948389

    When I do tax planning for clients, we use two safe harbor tests: 90% of the expected tax for the current tax year and 100% (or 110% if AGI >$150K) of prior year. As suggested above, check your state safe harbor--many states use 100%, but some use 110%. As long as clients are above at least one of the two tests, we are ok, but sometimes we will suggest the client make an adjustment to prevent too much being due the following April (when there could be tax due plus estimates due). As the first commentator suggested, given the low interest rate, if you pay more up front, you aren't really giving up interest earnings in this day and age.

  5. Kiki Says:
    March 22nd, 2015 at 12:43 am 1426985023
    1426985023

    If you pay only his estimates for the first payment can you put leftover amount toward what you need to be out of the duplex seller loan?

    And my estimated taxes for contract work were always so much less then I was expecting but I never took into consideration the expenses I was racking up that would offset the taxes that needed to be paid.

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]